SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the Period Ended April 8, 1995
or
[_] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from to
COMMISSION FILE NUMBER 1-63
MUNSINGWEAR, INC.
(Exact Name of Registrant as Specified in its Charter)
DELAWARE 41-0429620
(State of Incorporation) (I.R.S. Employer Identification No.)
8000 W. 78TH STREET, SUITE 400, MINNEAPOLIS, MINNESOTA 55439
(Address of principal executive office) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER: (612) 943-5000
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of 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
Indicate by check mark whether the registrant has filed all documents
and reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. YES _x_ NO ___
The number of shares of common stock outstanding at April 8, 1995 was 2,026,768.
MUNSINGWEAR, INC.
INDEX
Page No.
PART I: FINANCIAL INFORMATION
Condensed Consolidated Balance Sheets -
April 8, 1995 and January 7, 1995............................ 3
Condensed Consolidated Statements of Operations
for the Three Months ended April 8, 1995
and April 2, 1994............................................ 4
Condensed Consolidated Statements of Cash Flows
for the Three Months ended April 8, 1995
and April 2, 1994............................................ 5
Notes to Condensed Consolidated Financial Statements.......... 6
Management's Discussion and Analysis of
Financial Condition and Results of Operations................ 7
PART II: OTHER INFORMATION............................................. 9
SIGNATURES.................................................... 10
MUNSINGWEAR, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in thousands, except share data)
<TABLE>
<CAPTION>
April 8, January 7,
1995 1995
(Unaudited)
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents........................................................ $ 105 $ 73
Accounts receivable, less allowances of $538 and $442............................ 9,891 5,138
Inventories...................................................................... 14,162 14,219
Prepaid expenses and other....................................................... 946 1,286
Total current assets.......................................................... 25,104 20,716
Property, plant and equipment, less accumulated
depreciation and amortization of $1,447 and $1,330............................... 2,372 2,276
Deferred taxes, net of valuation allowance of $11,151............................... 2,146 2,309
Trademarks, net of amortization of $1,076 and $1,010................................ 4,371 4,437
$ 33,993 $ 29,738
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term notes payable......................................................... $ 7,599 $ 5,592
Current maturities of long-term debt............................................. 20 19
Accounts payable................................................................. 3,728 3,760
Accrued payroll and employee benefits............................................ 964 1,028
Unearned royalty income.......................................................... 3,305 3,159
Other accrued expenses........................................................... 268 311
Total current liabilities..................................................... 15,884 13,869
Long-term debt, less current maturities............................................. 33 38
Postretirement medical benefits..................................................... 312 312
Unearned royalty income............................................................. 2,157 200
2,502 550
Stockholders' equity:
Common Stock, $.01 par value:
Issued and issuable shares - 2,065,594........................................ 21 21
Capital in excess of par value................................................... 15,112 15,112
Retained earnings................................................................ 474 186
Total stockholders' equity.................................................... 15,607 15,319
$ 33,993 $ 29,738
</TABLE>
See notes to condensed consolidated financial statements.
MUNSINGWEAR, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts unaudited and in thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Three Months
Ended Ended
April 8, 1995 April 2, 1994
<S> <C> <C>
REVENUES:
Net sales........................................................... $ 14,622 $ 12,211
Royalties........................................................... 1,301 970
15,923 13,181
EXPENSES:
Cost of goods sold.................................................. 11,599 9,248
Selling, general and administrative................................. 3,599 2,982
15,198 12,230
OPERATING INCOME....................................................... 725 951
Interest expense, net.................................................. (250) (77)
Other ................................................................. 3 2
Income before taxes.................................................... 478 876
Provision for income taxes............................................. 190 333
NET INCOME.......................................................... $ 288 $ 543
NET INCOME PER COMMON SHARE......................................... $ 0.14 $ 0.26
Weighted average number of shares of
common stock........................................................ 2,066 2,066
</TABLE>
See notes to condensed consolidated financial statements.
MUNSINGWEAR, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts unaudited and in thousands)
<TABLE>
<CAPTION>
Three Months Three Months
Ended Ended
April 8, 1995 April 2, 1994
<S> <C> <C>
OPERATING ACTIVITIES
Net income from operations........................................... $ 288 $ 543
Reconciling items:
Depreciation and amortization..................................... 175 179
Provision for losses on accounts receivable....................... 50 45
Unearned royalty income........................................... 2,103 565
Utilization of net operating loss carryforwards................... 163 309
Changes in operating assets and liabilities:
Receivables.................................................... (4,803) (4,323)
Inventories.................................................... 57 1,166
Prepaid expenses............................................... 340 332
Accounts payable............................................... (32) (484)
Other current liabilities...................................... (107) (257)
Net cash used in operating activities.......................... (1,766) (1,925)
INVESTING ACTIVITIES
Purchase of property, plant and equipment............................ (205) (86)
Net cash used in investing activities.......................... (205) (86)
FINANCING ACTIVITIES
Net change in short-term notes payable............................... 2,007 1,826
Principal payments on long-term debt
and capital lease obligations..................................... (4) (93)
Net cash provided by financing activities...................... 2,003 1,733
Decrease in cash and cash equivalents.......................... 32 (278)
Cash and cash equivalents at beginning of period..................... 73 441
Cash and cash equivalents at end of period..................... $ 105 $ 163
</TABLE>
See notes to condensed consolidated financial statements.
MUNSINGWEAR, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Financial Statement Presentation
The condensed consolidated financial statements for the three months ended
April 8, 1995 of Munsingwear, Inc. (the Company) have been prepared by the
Company, without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission and reflect, in the opinion of
management, all normal recurring adjustments necessary to present fairly
the results of operations for the period. Certain information and footnote
disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been
condensed or omitted pursuant to such rules and regulations, although
management believes the disclosures are adequate to make the information
presented not misleading.
These financial statements should be read in conjunction with the
Company's most recent audited financial statements included in its 1994
Annual Report to Stockholders and its 1994 Form 10-K.
The results of operations for the interim period presented are not
necessarily indicative of the results to be expected for the full fiscal
year, since the Company typically reports disproportionately higher
revenues in its first quarter due to the seasonality of its product line.
2. Inventories
Inventories are stated at the lower of cost (first-in, first-out) or
market and consist of:
(000's omitted)
April 8, January 7,
1995 1995
Raw materials........................ $ 2,032 $ 2,029
Work in process...................... 1,563 1,401
Finished goods....................... 10,567 10,789
$14,162 $14,219
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS - FIRST QUARTER
TOTAL REVENUES for the quarter ended April 8, 1995, increased 21% over the
comparable period last year as a result of increased business with chain stores,
golf pro shops and the Company's new advertising premium/special markets channel
of distribution, and additional income recognized in connection with the late
1994 re-negotiation of the Company's licenses with Fruit of the Loom. The
Company's backlog of unfilled orders at the end of the first quarter was
approximately $15,500,000 compared to $14,600,000 at the same time a year ago.
COST OF GOODS SOLD increased in total principally as a result of the increased
volume. As a percent of net sales, gross margin dropped from 24.3% in 1994 to
20.7% in 1995 due to product mix and end-of-season markdowns. In addition, the
Company continues to experience intense competition from other golf apparel
suppliers and price resistance at retail remains strong.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES remained relatively unchanged as a
percent of sales from the comparable period last year. Expenses increased
$617,000 due to volume, costs related to upgrading the Company's management
information systems and hiring of senior management positions which were vacant
the first quarter of last year.
INTEREST EXPENSE increased $173,000 over the comparable period a year ago due to
increased borrowings, primarily the result of higher inventories to support the
Company's entry into the advertising premium/special markets channel of
distribution which requires an "in-stock" inventory position.
At the beginning of fiscal 1995, the Company had $32,800,000 of net operating
loss carryforwards for federal income tax purposes. In accordance with "Fresh
Start Reporting", which was required as a result of the Company's 1991
reorganization, benefits from the utilization of these net operating loss
carryforwards are recognized as a reduction in deferred taxes. For the first
quarter of 1995, that reduction was $163,000 versus $309,000 for the comparable
period a year ago.
CAPITAL RESOURCES AND LIQUIDITY
Capital Resources:
The financial condition of the Company is reflected in the following:
(000's omitted)
April 8, January 7,
1995 1995
Working capital...................... $ 9,220 $ 6,847
Current ratio........................ 1.6:1 1.5:1
Stockholders' equity................. $15,607 $15,319
As reported in the Statements of Cash Flows, operating activities during the
first three months of 1995 used $1,766,000 of cash, primarily the result of
increased receivables due to seasonally higher first quarter sales which were
partially offset by cash advances received on license agreements. The net use of
cash was financed through a $2,007,000 net increase in borrowings on the
Company's revolving credit loan. At the end of the first quarter, the Company
was in compliance with or had received waivers for all covenants on its bank
line of credit.
Liquidity:
In reaction to the continued sluggish retail environment, retailers' expanded
practice of waiting longer to commit orders and intense competition in the
marketplace, management continues to be cautious in making inventory commitments
for fashion merchandise. While planning to be more aggressive in the sale and
movement of end-of-season merchandise, management expects higher total
inventories and borrowing levels as compared to last year due to the need to
maintain an "in-stock" inventory position in support of the new advertising
premium/special markets business. Prospectively, management believes its
financial resources are sufficient to meet current and anticipated needs.
Management continues to emphasize customer satisfaction, continually improving
product quality, increasing product value and maintaining strategic positioning
of its brands in existing and expanding channels of distribution.
MUNSINGWEAR, INC.
PART II: OTHER INFORMATION
Item 5: Other Information
None.
Item 6: Exhibits and Reports on Form 8-K
Exhibit 27 - Financial Data Schedule (For SEC use only).
* * * * *
SIGNATURES
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.
Munsingwear, Inc.
(Registrant)
Date: May 22, 1995 /s/Lowell M. Fisher
Lowell M. Fisher
President & CEO
/s/Richard T. Brokl
Richard T. Brokl
Sr. Vice President, Operations & CFO
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<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-06-1996
<PERIOD-END> APR-08-1995
<CASH> 105
<SECURITIES> 0
<RECEIVABLES> 9,891
<ALLOWANCES> 538
<INVENTORY> 14,162
<CURRENT-ASSETS> 25,104
<PP&E> 3,819
<DEPRECIATION> 1,447
<TOTAL-ASSETS> 33,993
<CURRENT-LIABILITIES> 15,884
<BONDS> 0
<COMMON> 21
0
0
<OTHER-SE> 15,586
<TOTAL-LIABILITY-AND-EQUITY> 33,993
<SALES> 14,622
<TOTAL-REVENUES> 15,923
<CGS> 11,584
<TOTAL-COSTS> 11,559
<OTHER-EXPENSES> 3,599
<LOSS-PROVISION> 50
<INTEREST-EXPENSE> 250
<INCOME-PRETAX> 478
<INCOME-TAX> 190
<INCOME-CONTINUING> 288
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 288
<EPS-PRIMARY> 0.14
<EPS-DILUTED> 0.14
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