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 39 Weeks Ended October 4, 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 November 8, 1996
Class A Common Stock-$.33 1/3 Par Value 2,703,227
Class B Common Stock-$.33 1/3 Par Value 3,533,659
---------
6,236,886
HYDE ATHLETIC INDUSTRIES, INC.
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets as of October 4, 1996
and January 5, 1996
Condensed Consolidated Statements of Income for the
thirteen weeks and thirty-nine weeks ended
October 4, 1996 and September 29, 1995
Condensed Consolidated Statements of Stockholders'
Equity for the thirty-nine weeks ended October 4, 1996
and September 29, 1995
Condensed Consolidated Statements of Cash Flows
for the thirty-nine weeks ended October 4, 1996
and September 29, 1995
Notes to Condensed Consolidated Financial Statements -
October 4, 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
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
HYDE ATHLETIC INDUSTRIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
(Unaudited)
ASSETS
October 4, January 5,
1996 1996
---- ----
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 5,225,522 $ 11,668,316
Marketable securities 197,115 307,500
Accounts receivable 27,165,524 17,361,195
Inventories 24,276,239 26,831,600
Prepaid expenses and other current assets 2,591,786 3,021,479
------------ ------------
TOTAL CURRENT ASSETS 59,456,186 59,190,090
------------ ------------
PROPERTY, PLANT, AND EQUIPMENT, NET 9,197,181 8,122,937
------------ ------------
OTHER ASSETS
Investment in limited partnership 753,433 753,433
Other assets 1,282,503 1,404,829
------------ ------------
TOTAL OTHER ASSETS 2,035,936 2,158,262
------------ ------------
TOTAL ASSETS $ 70,689,303 $ 69,471,289
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable $ 3,896,027 $ 4,336,940
Accounts payable 4,891,063 5,055,967
Accrued expenses and other current liabilities 3,542,479 3,136,653
Current maturities of long-term debt 2,440,724 2,199,225
------------ ------------
TOTAL CURRENT LIABILITIES 14,770,293 14,728,785
------------ ------------
LONG-TERM DEBT 3,350,321 4,205,568
------------ ------------
DEFERRED INCOME TAXES 1,929,192 2,001,655
------------ ------------
MINORITY INTEREST 583,223 170,227
------------ ------------
STOCKHOLDERS' EQUITY
Common stock, $.33 1/3 par value 2,145,095 2,138,514
Additional paid-in capital 15,584,382 15,521,470
Retained earnings 33,666,647 32,210,867
Accumulated translation (188,272) (257,694)
------------- -------------
Total 51,207,852 49,613,157
Less: Unearned compensation 97,788 194,313
Treasury stock 1,053,790 1,053,790
------------ ------------
TOTAL STOCKHOLDERS' EQUITY 50,056,274 48,365,054
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 70,689,303 $ 69,471,289
============ ============
See notes to consolidated financial statements
</TABLE>
<TABLE>
HYDE ATHLETIC INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
FOR THE THIRTEEN WEEKS AND THIRTY-NINE WEEKS ENDED OCTOBER 4, 1996 AND
SEPTEMBER 29, 1995
(Unaudited)
<CAPTION>
13 Weeks 13 Weeks 39 Weeks 39 Weeks
Ended Ended Ended Ended
Oct. 4, Sept. 29, Oct. 4, Sept. 29,
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales $ 27,713,518 $ 25,649,266 $ 88,646,401 $ 81,300,904
Other income 95,914 383,692 713,161 1,369,781
---------------- ---------------- ----------------- ----------------
Total revenue 27,809,432 26,032,958 89,359,562 82,670,685
---------------- ---------------- ----------------- ----------------
Costs and expenses
Cost of sales 18,903,001 17,464,091 62,339,454 55,220,901
Selling, general and
administrative expenses 7,534,441 7,775,764 23,475,907 23,649,529
Interest expense 230,660 228,306 732,905 974,937
---------------- ---------------- ----------------- ----------------
Total costs and expenses 26,668,102 25,468,161 86,548,266 79,845,367
---------------- ---------------- ----------------- ----------------
Income before income taxes
and minority interest 1,141,330 564,797 2,811,296 2,825,318
Provision for income taxes 392,183 220,581 980,110 1,098,528
Minority interest in income (loss) of
consolidated subsidiaries 146,529 24,808 375,406 (60,594)
---------------- ---------------- ----------------- -----------------
Net income $ 602,618 $ 319,408 $ 1,455,780 $ 1,787,384
================ ================ ================= ================
Per share amounts:
Net income $0.10 $0.05 $0.23 $0.29
=============== ================ ================= ================
Weighted average common shares
and equivalents outstanding 6,268,925 6,231,606 6,246,370 6,243,411
================ ================ ================= ================
Cash dividends per share of
common stock $ 0 $ 0 $ 0 $ 0
================ ================ ================= ================
See notes to consolidated financial statements
</TABLE>
<TABLE>
HYDE ATHLETIC INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE THIRTY-NINE WEEKS ENDED OCTOBER 4, 1996 AND SEPTEMBER 29, 1995
(Unaudited)
<CAPTION> Additional
Common Stock Paid-In Retained
Class A Class B Capital Earnings
------ ------- ------ --------
<S> <C> <C> <C> <C>
Balance, December 31, 1994 $ 901,342 $ 1,236,705 $ 15,592,805 $ 30,619,761
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 -- -- -- --
Net income -- -- -- 1,787,384
Foreign currency translation
adjustments -- -- -- --
-------------- ------------------ -----------------
Balance, September 29, 1995 $ 901,575 $ 1,236,939 $ 15,521,470 $ 32,407,145
============== ================== =================
Balance, January 6, 1996 $ 901,575 $ 1,236,939 $ 15,521,470 $ 32,210,867
Issuance of 19,744 shares
of common stock, stock
option exercise 500 6,081 62,912 --
Amortization of unearned
compensation -- -- -- --
Net income -- -- -- 1,455,780
Foreign currency translation
adjustments -- -- -- --
-------------- ------------------ -----------------
Balance, October 4, 1996 $ 902,075 $ 1,243,020 $ 15,584,382 $ 33,666,647
============== ================== =================
Total
Treasury Stock Unearned Accumulated Stockholders'
Shares Amount Compensation Translation Equity
------ ------ ------------ ---------- ------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1994 180,700 ($ 977,103) ($ 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 -- -- 130,379 -- 130,379
Acquisition of 17,700 shares
of common stock, at cost 17,700 (76,687) -- -- (76,687)
Net income -- -- -- -- 1,787,384
Foreign currency translation
adjustments -- -- -- (33,107) (33,107)
---------- --------------- --------------- --------------------------------
Balance, September 29, 1995 198,400 ($ 1,053,790) ($ 242,313) ($ 204,578) $ 48,566,448
========== ================ ================ ============== ===============
Balance, January 6, 1996 198,400 ($ 1,053,790) ($ 194,313) ($ 257,694) $ 48,365,054
Issuance of 19,744 shares
of common stock, stock
option exercise -- -- -- -- 69,493
Amortization of unearned
compensation -- -- 96,525 -- 96,525
Net income -- -- -- -- 1,455,780
Foreign currency translation
adjustments -- -- -- 69,422 69,422
---------- --------------- --------------- --------------- ---------------
Balance, October 4, 1996 198,400 ($ 1,053,790) ($ 97,788) ($ 188,272) $ 50,056,274
========== ================ ================ ===============================
See notes to condensed consolidated financial statements
</TABLE>
<TABLE>
HYDE ATHLETIC INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THIRTY-NINE WEEKS ENDED OCTOBER 4, 1996 AND SEPTEMBER 29, 1995
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
(Unaudited)
<CAPTION>
October 4, September 29,
1996 1995
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income $ 1,455,780 $ 1,787,384
--------------------- ---------------------
Adjustments to reconcile net income to
net cash
Provided (used) by operating activities:
Depreciation and amortization 1,100,018 854,765
Deferred income tax provision (benefit) 71,678 (145,570)
Provision for bad debts and discounts 4,250,181 4,027,193
Minority interest in consolidated
subsidiaries income (loss) 375,406 (60,594)
Compensation from stock grants and
stock options 96,525 130,379
Gain on sale of equipment 4,372 --
Gain on sale of investment in limited
partnership -- (397,645)
Changes in operating assets and liabilities:
Decrease (increase) in assets:
Marketable securities 110,385 --
Accounts receivable (13,721,241) (817,040)
Inventories 2,633,235 4,807,214
Prepaid expenses and other current
assets 255,988 (333,200)
Increase (decrease) in liabilities:
Accounts payable (161,118) (1,046,045)
Accrued expenses 493,495 (1,823,497)
--------------------- ----------------------
Total adjustments (4,491,076) 5,195,960
---------------------- ---------------------
Net cash provided (used) by operating activities (3,035,296) 6,983,344
---------------------- ---------------------
Cash flows from investing activities:
Purchases of property, plant and
equipment (773,827) (320,908)
Increase in other assets (424,314) (76,352)
Proceeds from the sale of equipment 76,896 --
Payments for business acquisitions -- (112,000)
Proceeds from sale of investment in
limited partnership -- 1,335,289
--------------------- ---------------------
Net cash provided (used) by investing activities (1,121,245) 826,029
---------------------- ---------------------
Cash flows from financing activities:
Net short-term borrowings (559,057) 91,724
Repayment of long-term debt
and capital lease obligations (2,280,584) (2,725,664)
Proceeds from long-term borrowings 419,766 --
Payment of termination benefit payable -- (26,866)
Common stock repurchased -- (76,687)
Issuances of common stock, including
options 69,493 3,651
--------------------- ---------------------
Net cash used by financing activities (2,350,382) (2,733,842)
Effect of exchange rate changes on cash
and cash equivalents 64,129 (123,434)
--------------------- ----------------------
Net increase (decrease) in cash
and cash equivalents (6,442,794) 4,952,097
Cash and equivalents at beginning of
period 11,668,316 3,349,776
--------------------- ---------------------
Cash and equivalents at end of period $ 5,225,522 $ 8,301,873
===================== =====================
Supplemental disclosure of cash flow
information:
Cash paid during the period for:
Incomes taxes, net of refunds $ 691,222 $ 1,874,520
===================== =====================
Interest $ 607,003 $ 1,132,024
===================== =====================
Non-cash investing and financing activities:
Property purchased under capital leases $ 1,108,510 $ 98,103
===================== =====================
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 -- $ 0
===================== =====================
See notes to condensed consolidated financial statements
</TABLE>
HYDE ATHLETIC INDUSTRIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
October 4, 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 principles. In the opinion of Management, all
adjustments (consisting solely of normal recurring adjustments) necessary for a
fair presentation have been included. Operating results for the thirty-nine
weeks ended October 4, 1996 are not necessarily indicative of the results for
the entire year.
NOTE B - INVENTORIES
Inventories at October 4, 1996 and January 5, 1996, consisted of the following:
October 4, January 5,
1996 1996
---- ----
Finished Goods $ 19,197,608 $ 22,954,048
Work in Process 509,175 20,243
Raw Materials and Supplies 4,569,456 3,857,309
------------- -------------
$ 24,276,239 $ 26,831,600
============= =============
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following table sets forth net sales and percentages of net sales of the
Company's product lines in the thirteen weeks and thirty-nine weeks ended
October 4, 1996 and September 29, 1995:
THIRTEEN WEEKS ENDED OCTOBER 4, 1996 AND SEPTEMBER 29, 1995
-----------------------------------------------------------
1996 % 1995 %
---- -- ---- --
Saucony $17,215,000 62.1% $15,446,000 60.2%
Brookfield 7,104,000 25.7% 8,145,000 31.8%
Other 3,395,000 12.2% 2,058,000 8.0%
----------- ------ ----------- ------
Total $27,714,000 100.0% $25,649,000 100.0%
=========== ====== =========== ======
THIRTY-NINE WEEKS ENDED OCTOBER 4, 1996 AND SEPTEMBER 29, 1995
--------------------------------------------------------------
1996 % 1995 %
---- -- ---- --
Saucony $64,100,000 72.3% $57,292,000 70.5%
Brookfield 15,003,000 16.9% 17,984,000 22.1%
Other 9,543,000 10.8% 6,025,000 7.4%
----------- ------ ----------- ------
Total $88,646,000 100.0% $81,301,000 100.0%
=========== ====== =========== ======
THIRTEEN WEEKS ENDED OCTOBER 4, 1996 COMPARED TO THIRTEEN WEEKS ENDED SEPTEMBER
29, 1995
The Company's net sales increased by 8.0% to $27,714,000 in the thirteen weeks
ended October 4, 1996 from $25,649,000 in the thirteen weeks ended September 29,
1995.
Net sales of the Company's Saucony products increased 11% to $17,215,000 in the
thirteen weeks ended October 4, 1996 from $15,446,000 in the thirteen weeks
ended September 29, 1995, due primarily to higher selling prices. Saucony
domestic net sales increased 8% to $10,797,000 in the thirteen weeks ended
October 4, 1996 from $9,959,000 in the thirteen weeks ended September 29, 1995,
due to a change in product mix, with increased sales of recently introduced
products that have higher selling prices. Saucony foreign net sales increased
by 17% to $6,418,000 in the thirteen weeks ended October 4, 1996 from $5,487,000
in the thirteen weeks ended September 29, 1995, due primarily to higher selling
prices and, to a lesser extent, increased unit shipment volume.
Net sales of the Company's Brookfield products decreased by 13% to $7,104,000 in
the thirteen weeks ended October 4, 1996 from $8,145,000 in the thirteen weeks
ended September 29, 1995. Brookfield domestic sales decreased by 50% to
$3,117,000 in the thirteen weeks ended October 4, 1996 from $6,216,000 in the
thirteen weeks ended September 29, 1995, as a result of lower unit shipment
volume and a shift in the sales mix to lower-priced products. Brookfield
foreign net sales increased 107% to $3,987,000 in the thirteen weeks ended
October 4, 1996 from $1,929,000 in the thirteen weeks ended September 29, 1995,
due primarily to increased unit shipment volume and a change in the product mix,
with increased sales of the Company's recently introduced products that have
higher selling prices.
Net sales of other products increased 65% to $3,395,000 in the thirteen weeks
ended October 4, 1996 from $2,058,000 in the thirteen weeks ended September 29,
1995, due primarily to additional sales from the Company's wholly-owned
subsidiary, Quintana Roo, Inc. ("Quintana Roo"), which was acquired in August
1995, and increased sales of non-corporate brands.
Other income decreased 75% to $96,000 in the thirteen weeks ended October 4,
1996 from $384,000 in the thirteen weeks ended September 29, 1995, due primarily
to lower foreign currency transaction income on U.S. dollar denominated
obligations held by the Company's foreign subsidiaries and lower income on
short-term cash investments.
The Company's gross profit increased to $8,811,000 in the thirteen weeks ended
October 4, 1996 from $8,185,000 in the thirteen weeks ended September 29, 1995.
The Company's gross margin percent decreased to 31.8% in the thirteen weeks
ended October 4, 1996 from 31.9% in the thirteen weeks ended September 29, 1995,
reflecting a decreased gross margin for Brookfield products, offset in part by
increased gross margin for Saucony products. The gross margin increase for
Saucony products resulted from decreased sales of prior-season styles in the
thirteen weeks ended October 4, 1996 compared to the thirteen weeks ended
September 29, 1995. The decline in the Brookfield gross margin resulted from a
shift in the sales mix to lower-margin domestic Brookfield products and
increased international sales, which have lower margins than domestic sales.
Selling, general and administrative expenses decreased to $7,534,000, or 27.2%
of net sales, in the thirteen weeks ended October 4, 1996 from $7,776,000, or
30.3% of net sales, in the thirteen weeks ended September 29, 1995. Advertising
and promotion expenses decreased $199,000 in the thirteen weeks ended October 4,
1996 due primarily to decreased Saucony domestic media advertising and decreased
account-specific promotions. Selling expenses decreased by $87,000 due to
increased sales of Brookfield products, which are commissionable at lower rates.
General and administrative expenses increased $44,000 in the thirteen weeks
ended October 4, 1996, due to increased spending related to Quintana Roo, which
was acquired in August 1995.
Interest expense increased 1% to $231,000 in the thirteen weeks ended October 4,
1996 from $228,000 in the thirteen weeks ended September 29, 1995, due to
increased domestic and foreign asset-based borrowing.
The effective tax rate decreased by 12.0% to 34.4% for the thirteen weeks ended
October 4, 1996 from 39.1% for the thirteen weeks ended September 29, 1995,
primarily due to a shift in the composition of foreign and domestic pretax
profits.
THIRTY-NINE WEEKS ENDED OCTOBER 4, 1996 COMPARED TO THIRTY-NINE WEEKS ENDED
SEPTEMBER 29, 1995
The Company's net sales increased 9.0% to $88,646,000 in the thirty-nine weeks
ended October 4, 1996 from $81,301,000 in the thirty-nine weeks ended September
29, 1995.
Net sales of the Company's Saucony products increased 12% to $64,100,000 in the
thirty-nine weeks ended October 4, 1996 from $57,292,000 in the thirty-nine
weeks ended September 29, 1995, due primarily to increased unit shipment volume
and, to a lesser extent, higher selling prices. Saucony domestic net sales
increased 16% to $45,053,000 in the thirty-nine weeks ended October 4, 1996 from
$38,883,000 in the thirty-nine weeks ended September 29, 1995, due to increased
unit shipment volume and a change in product mix, with increased sales of
recently introduced products that have higher selling prices. Saucony foreign
net sales increased 3% to $19,047,000 in the thirty-nine weeks ended October 4,
1996 from $18,409,000 in the thirty-nine weeks ended September 29, 1995, due to
higher selling prices.
Net sales of the Company's Brookfield products decreased 16% to $15,003,000 in
the thirty-nine weeks ended October 4, 1996 from $17,984,000 in the thirty-nine
weeks ended September 29, 1995. Brookfield domestic net sales decreased 55% to
$6,383,000 in the thirty-nine weeks ended October 4, 1996 from $14,240,000 in
the thirty-nine weeks ended September 29, 1995 as a result of lower unit
shipment volume and a shift in sales mix to lower-priced product. Brookfield
foreign net sales increased 130% to $8,620,000 in the thirty-nine weeks ended
October 4, 1996 from $3,744,000 in the thirty-nine weeks ended September 29,
1995, reflecting increased unit shipment volume and, to a lesser extent, higher
selling prices.
Net sales of other products increased by 58% to $9,543,000 in the thirty-nine
weeks ended October 4, 1996 from $6,025,000 in the thirty-nine weeks ended
September 29, 1995, due primarily to the addition of Quintana Roo and increased
sales of non-corporate brands.
Other income decreased 48% to $713,000 in the thirty-nine weeks ended October 4,
1996 from $1,370,000 in the thirty-nine weeks ended September 29, 1995, due
primarily to the gain on the sale of the Company's investment in a limited
partnership and the receipt of the final payment under a litigation settlement,
both of which were recognized in the thirty-nine weeks ended September 29, 1995.
The Company's gross profit increased to $26,307,000 in the thirty-nine weeks
ended October 4, 1996 from $26,080,000 in the thirty-nine weeks ended September
29, 1995. The Company's gross margin decreased to 29.7% in the thirty-nine
weeks ended October 4, 1996 from 32.1% in the thirty-nine weeks ended September
29, 1995, reflecting decreases in gross margin for both Saucony and Brookfield
products. The gross margin decrease for Saucony products resulted from the
shipment of a single slow-moving non-current model, increased sales of lower-
priced, lower-margin footwear, and, to a lesser extent, increased freight costs.
The decline in Brookfield gross margin resulted from a shift in the sales mix to
lower-margin domestic Brookfield products and increased international sales,
which have lower margins than domestic sales.
Selling, general and administrative expenses decreased to $23,476,000, or 26.5%
of net sales, in the thirty-nine weeks ended October 4, 1996 from $23,650,000,
or 29.1% of net sales, in the thirty-nine weeks ended September 29, 1995.
Advertising and promotion expenses increased $418,000 in the thirty-nine weeks
ended October 4, 1996 due primarily to increased Saucony domestic television and
print media advertising. Selling expenses decreased $521,000 in the period, due
to increased sales of Saucony and Brookfield products which are commissionable
at lower rates. General and administrative expenses decreased $71,000 in the
thirty-nine weeks ended October 4, 1996 due to reductions in professional fees,
bad debt expense and payroll, offset in part by increased spending related to
Quintana Roo, which was acquired in August 1995.
Interest expense decreased 25% to $733,000 in the thirty-nine weeks ended
October 4, 1996 from $975,000 in the thirty-nine weeks ended September 29, 1995,
reflecting the paydown of the Company's senior notes and debt reduction realized
as a result of the sale by the Company of its limited partnership investment.
The effective tax rate decreased 10.3% to 34.9% in the thirty-nine weeks ended
October 4, 1996 from 38.9% in the thirty-nine weeks ended September 29, 1995,
primarily due to a shift in the composition of foreign and domestic pretax
profits.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
As of October 4, 1996, the Company's cash and cash equivalents totaled
$5,226,000, a decrease of $6,443,000 from January 5, 1996. The decrease was the
result of an increase in accounts receivable of $9,471,000, net of the provision
for bad debts and discounts of $4,250,000, offset in part by a decrease of
$2,633,000 in inventory, and the depreciation and amortization provision of
$1,100,000. The increase in accounts receivable is due in part to increased net
sales of the Company's Saucony products during the thirty-nine weeks ended
October 4, 1996. In addition, the Company's days sales outstanding for its
accounts receivable increased to 89 days in the thirty-nine weeks ended October
4, 1996 from 73 days in the thirty-nine weeks ended September 29, 1995 due to
longer payment terms given to the Company's customers. Inventories decreased
due to improved inventory planning and the Company's decision to reduce
inventories of slower-moving prior-season styles. As a result, the Company's
inventory turn ratio increased to 3.3 turns in the thirty-nine weeks ended
October 4, 1996 from 2.5 turns in the thirty-nine weeks ended September 29,
1995.
For the thirty-nine weeks ended October 4, 1996, the Company used $3,035,000 of
net cash to finance operating activities, expended $1,198,000 to acquire capital
assets and information technology, received $77,000 from the sale of capital
assets, reduced short-term borrowings by $559,000, expended $2,281,000 to reduce
long-term debt, received $69,000 from the issuance of shares of the Company's
common stock pursuant to stock option exercises 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, accounts receivable and inventory,
affecting the operating cash flows in the thirty-nine weeks ended October 4,
1996, included a decrease in prepaid expenses and other current assets of
$256,000 (due to the timing of advance payments for operating expenses) and an
increase in accrued expenses of $493,000 (due primarily to higher selling and
marketing expenses associated with the higher sales level). The strengthening
of the U.S. dollar increased the value of cash and cash equivalents by $64,000.
The Company's two principal banks have agreed to amend the Company's credit
facility to provide for a $30,000,000 credit line. As amended, the agreement
will extend through July 31, 1998 and provide for a short-term demand line of
credit, in the principal amount of up to $15,000,000, subject to formula
adjustment, and a revolving line of credit in the principal amount of
$15,000,000. The principal terms and conditions of the prior credit agreement
will remain unchanged.
On June 27, 1996, the Company acquired an information technology hardware system
at a cost of $991,000 pursuant to a long-term capital lease. The lease provides
for a bargain purchase option at the conclusion of the lease term.
As of October 4, 1996, the Company had various commitments for capital
expenditures, including information technology. During the balance of fiscal
1996, the Company expects to spend approximately an additional $800,000 for
capital expenditures, primarily information technology. The Company plans to
finance such expenditures with a mix of internally generated funds and asset-
based lending. The recently acquired information system is expected to be
operational in fiscal 1997.
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
as 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. 25, "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 fiscal year 1996.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits
11 - Computation of Earnings Per Share
27 - 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: November 15, 1996 By: /s/Charles A. Gottesman
-----------------------
Charles A. Gottesman
Executive Vice President and
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 For the
Thirteen Weeks Ended Thirty-Nine Weeks Ended
-------------------- -----------------------
Oct. 4, Sept.29, Oct. 4, Sept.29,
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
PRIMARY
Net income applicable to
common stock $ 602,618 $ 319,408 $ 1,455,780 $ 1,787,384
Weighted average shares:
Average shares outstanding 6,223,639 6,217,142 6,219,308 6,227,563
Dilutive stock options
based upon application
of the treasury stock
method using average
market price 45,286 14,464 27,062 15,848
---------- --------- --------- ---------
Total shares 6,268,925 6,231,606 6,246,370 6,243,411
========= ========= ========= =========
Net income per share $ 0.10 $ 0.05 $ 0.23 $ 0.29
============ =========== ============ ============
FULLY DILUTED
Net income applicable to
common stock $ 602,618 $ 319,408 $ 1,455,780 $ 1,787,384
Weighted average shares:
Average shares outstanding 6,223,639 6,217,142 6,219,308 6,227,563
Dilutive stock options
based upon application of
the treasury stock method
using market price at end
of period or average market
price, if greater 45,073 14,560 46,917 16,203
--------- --------- --------- ---------
Total shares 6,268,712 6,231,702 6,266,225 6,243,766
========= ========= ========= =========
Net income per share $ 0.10 $ 0.05 $ 0.23 $ 0.29
============ ============ ============ ============
</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 October 4, 1996 and is
qualified in its entirety by reference to such 10-Q.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JAN-03-1997
<PERIOD-END> OCT-04-1996
<CASH> 5,225,522
<SECURITIES> 197,115
<RECEIVABLES> 27,165,524
<ALLOWANCES> 560,464
<INVENTORY> 24,276,239
<CURRENT-ASSETS> 59,456,186
<PP&E> 9,197,181
<DEPRECIATION> 7,315,394
<TOTAL-ASSETS> 70,689,303
<CURRENT-LIABILITIES> 14,770,293
<BONDS> 3,350,321
0
0
<COMMON> 2,145,095
<OTHER-SE> 47,911,179
<TOTAL-LIABILITY-AND-EQUITY> 70,689,303
<SALES> 88,646,401
<TOTAL-REVENUES> 89,359,562
<CGS> 62,339,454
<TOTAL-COSTS> 62,339,454
<OTHER-EXPENSES> 23,475,907
<LOSS-PROVISION> 420,952
<INTEREST-EXPENSE> 732,905
<INCOME-PRETAX> 2,811,296
<INCOME-TAX> 980,110
<INCOME-CONTINUING> 1,455,780
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,455,780
<EPS-PRIMARY> 0.23
<EPS-DILUTED> 0.23
</TABLE>
