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 July 3, 1999
or
|_| Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from _______ to ________
----------------------------------------
COMMISSION FILE NUMBER 1-63
PREMIUMWEAR, INC.
(Exact Name of Registrant as Specified in its Charter)
DELAWARE 41-0429620
(State of Incorporation) (I.R.S. Employer Identification No.)
5500 FELTL ROAD, MINNETONKA, MINNESOTA 55343-7902
(Address of principal executive office) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER: 1-800-248-0158 OR (612) 979-1700
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 ___
The number of shares of common stock outstanding at August 3, 1999 was
2,541,422.
This Form 10-Q consists of 17 pages.
<PAGE>
PREMIUMWEAR, INC.
INDEX
Page No.
--------
PART I: FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets
July 3, 1999 and January 2, 1999................................. 3
Condensed Consolidated Statements of Operations
for the Three Months and Six Months ended July 3, 1999
and July 4, 1998................................................. 4
Condensed Consolidated Statements of Cash Flows
for the Six Months ended July 3, 1999 and July 4, 1998........... 5
Notes to Condensed Consolidated Financial Statements............. 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations.................... 9
Item 3. Qualitative and Quantitative Disclosures about Market Risk....... 14
PART II: OTHER INFORMATION
Item 5. Other Information................................................ 15
Item 6. Exhibits and Reports on Form 8-K................................. 15
Exhibit 27 - Financial Data Schedule............................. 17
2
<PAGE>
PREMIUMWEAR, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts unaudited and in thousands)
<TABLE>
<CAPTION>
July 3, January 2,
1999 1999
---------- ----------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents .......................................... $ 334 $ 3,215
Accounts receivable, less allowances of $631 and $728 .............. 8,013 6,026
Inventories ........................................................ 9,345 9,037
Deferred taxes ..................................................... 944 944
Prepaid expenses and other ......................................... 702 624
---------- ----------
Total current assets ......................................... 19,338 19,846
---------- ----------
Property, plant and equipment, less accumulated
depreciation and amortization of $4,821 and $4,335 ................. 1,696 1,118
Deferred taxes ........................................................ 1,556 1,556
Goodwill .............................................................. 2,337 --
---------- ----------
$ 24,927 $ 22,520
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Line of credit borrowings .......................................... $ 182 $ --
Accounts payable ................................................... 2,928 3,061
Accrued payroll and employee benefits .............................. 1,235 1,552
Other accruals ..................................................... 1,476 409
---------- ----------
Total current liabilities .............................. 5,821 5,022
---------- ----------
Postretirement benefits ............................................... 695 695
---------- ----------
Shareholders' equity:
Common stock, $.01 par value:
2,591,422 and 2,339,530 shares issued ........................ 26 23
Additional paid-in capital ......................................... 15,962 14,490
Treasury stock at cost, 50,000 shares at July 3, 1999 .............. (272) --
Retained earnings .................................................. 2,695 2,290
---------- ----------
Total shareholders' equity ................................... 18,411 16,803
---------- ----------
$ 24,927 $ 22,520
========== ==========
</TABLE>
See notes to condensed consolidated financial statements.
3
<PAGE>
PREMIUMWEAR, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts unaudited and in thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
July 3, July 4, July 3, July 4,
1999 1998 1999 1998
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
REVENUES:
Net sales ...................................... $ 13,986 $ 12,938 $ 22,984 $ 22,288
Commissions .................................... 393 -- 442 --
---------- ---------- ---------- ----------
14,379 12,938 23,426 22,288
---------- ---------- ---------- ----------
EXPENSES:
Cost of goods sold ............................. 9,909 9,869 16,085 16,798
Selling, general and administrative ............ 3,042 2,333 5,357 4,335
Operations restructuring ....................... 1,200 -- 1,300 --
---------- ---------- ---------- ----------
14,151 12,202 22,742 21,133
---------- ---------- ---------- ----------
Operating income .................................. 228 736 684 1,155
Interest income (expense), net .................... (14) 30 25 47
Other ............................................. (24) -- (27) 1
---------- ---------- ---------- ----------
Income before income taxes ........................ 190 766 682 1,203
Provision for income taxes ........................ 75 306 277 487
---------- ---------- ---------- ----------
NET INCOME ..................................... $ 115 $ 460 $ 405 $ 716
========== ========== ========== ==========
NET INCOME PER COMMON SHARE:
BASIC .................................... $ 0.04 $ 0.20 $ 0.16 $ 0.31
========== ========== ========== ==========
DILUTED .................................. $ 0.04 $ 0.19 $ 0.16 $ 0.30
========== ========== ========== ==========
Weighted average number of shares of
common stock outstanding:
Basic .................................... 2,571 2,320 2,469 2,319
Diluted .................................. 2,605 2,367 2,517 2,365
</TABLE>
See notes to condensed consolidated financial statements.
4
<PAGE>
PREMIUMWEAR, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts unaudited and in thousands)
<TABLE>
<CAPTION>
Six Months Ended
July 3, 1999 July 4, 1998
------------ ------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income ........................................................... $ 405 $ 716
Reconciling items:
Depreciation and amortization .................................. 302 237
Provision for losses on accounts receivable .................... 45 55
Utilization of net operating loss carryforwards ................ 233 385
Changes in operating assets and liabilities:
Accounts receivable ...................................... (1,642) (3,461)
Inventories .............................................. (233) (513)
Prepaid expenses and other ............................... 7 (10)
Accounts payable ......................................... (432) 1,512
Other current liabilities ................................ 680 165
------------ ------------
Net cash used in operating activities .......................... (635) (914)
------------ ------------
INVESTING ACTIVITIES:
Purchase of property, plant and equipment ............................ (655) (132)
Purchase of Klouda-Lenz, net of cash acquired ........................ (1,474) --
------------ ------------
Net cash used in investing activities .......................... (2,129) (132)
------------ ------------
FINANCING ACTIVITIES:
Net change in line of credit borrowings .............................. 122 --
Proceeds from exercise of stock options .............................. 33 1
Purchase of treasury stock ........................................... (272) --
------------ ------------
Net cash provided by (used in) financing activities ............ (117) 1
------------ ------------
Decrease in cash and cash equivalents .......................... (2,881) (1,045)
Cash and cash equivalents at beginning of period ..................... 3,215 2,870
------------ ------------
Cash and cash equivalents at end of period ........................... $ 334 $ 1,825
============ ============
Non-cash transaction:
Issuance of 241,892 shares of common stock in Klouda-Lenz
acquisition ......................................................... $ 1,209 $ --
============ ============
</TABLE>
See notes to condensed consolidated financial statements.
5
<PAGE>
PREMIUMWEAR, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS AND SIX MONTHS ENDED JULY 3, 1999
1. Basis of Financial Statement Presentation
The condensed consolidated financial statements for the three months
and six months ended July 3, 1999 of PremiumWear, Inc. (the Company),
formerly known as Munsingwear, Inc., 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.
Due to seasonality of the business, results of operations for the six
months ended July 3, 1999 are not necessarily indicative of results for
the full year.
These financial statements should be read in conjunction with the
Company's most recent audited financial statements included in its 1998
Annual Report to Shareholders and its 1998 Form 10-K.
2. Inventories
Inventories are stated at the lower of cost (first-in, first-out) or
market and consist of:
July 3, January 2,
(In thousands) 1999 1999
---------- ----------
Raw materials ......................... $ 647 $ 632
Work in process ....................... 1,271 1,432
Finished goods ........................ 7,427 6,973
---------- ----------
$ 9,345 $ 9,037
========== ==========
3. Financing Arrangements
The Company has a bank line of credit under which up to $6,000,000 is
available for borrowings and letters of credit through February 2000.
Borrowings and letters of credit are limited to an aggregate amount
equaling approximately 80% of eligible receivables and 50% of eligible
finished goods inventories, and essentially all assets except property,
plant and equipment are pledged as collateral under the agreement. At
July 3, 1999, $5,252,000 was available under the line of credit.
Amounts utilized for borrowings and letters of credit were $182,000 and
$566,000 respectively.
6
<PAGE>
4. Net Income per Common Share
Net income per common share was computed as follows:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
July 3, July 4, July 3, July 4,
1999 1998 1999 1998
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Basic Earnings Per Share:
Weighted average number of
common shares outstanding ............. 2,571,000 2,320,000 2,469,000 2,319,000
Net income .......................... $ 115,000 $ 460,000 $ 405,000 $ 716,000
Net income per common
share .............................. $ 0.04 $ 0.20 $ 0.16 $ 0.31
========== ========== ========== ==========
Diluted Earnings Per Share:
Weighted average number of
common shares outstanding ............. 2,571,000 2,320,000 2,469,000 2,319,000
Common share equivalents from
assumed exercise of options ........... 34,000 47,000 48,000 46,000
---------- ---------- ---------- ----------
Total shares ........................ 2,605,000 2,367,000 2,517,000 2,365,000
Net income .......................... $ 115,000 $ 460,000 $ 405,000 $ 716,000
Net income per common share
and common share equivalents ....... $ 0.04 $ 0.19 $ 0.16 $ 0.30
========== ========== ========== ==========
</TABLE>
5. Restructuring of Operations
In recent years the Company has increased its use of full package
imports and 807 contractor sewing operations, steadily reducing its
level of domestic production. During the first six months of 1999,
offshore production represented 88% of total sourcing vs. 67% in all of
1998 and 40% in all of 1997. As a result of this trend and the need to
remain competitive, on April 26,1999, management announced the closing
of its North Carolina manufacturing and distribution facilities.
Manufacturing operations will be transferred primarily to offshore
contract manufacturers and embroidery and distribution facilities will
be moved to a new leased facility in Clarksville, Tennessee.
In the first six months of 1999, the Company recorded a pre-tax charge
of $1,300,000 for estimated severance of approximately 220 employees,
occupancy, legal, consulting and other expenses related to the North
Carolina facilities closing. As of July 3, 1999, 129 employees had been
terminated, sewing manufacturing was shut down, and $190,000 of the
estimated expenses had been paid. The remaining $1,110,000 accrued is
included in Other accruals at July 3, 1999.
Management expects cutting operations to cease late in the third
quarter of 1999 and embroidery and distribution center operations to
close in the fourth quarter of 1999. At that time, the Company plans to
donate the properties to the City of Fairmont, North
7
<PAGE>
Carolina, which intends to use the buildings for various civic and
local government activities. The property includes two buildings
totaling approximately 139,100 square feet on 20 acres of land.
Embroidery and distribution activities are being transferred to a new
103,000 square foot leased facility in Clarksville, Tennessee. Transfer
of these operations is planned to begin late in the third quarter and
be completed by 1999 year end. Management estimates that additional
expenses of approximately $400,000 will be incurred and recognized
during the last six months of 1999, primarily for training of new
employees, management relocation, and equipment and inventory
transfers.
6. Reclassifications
Certain amounts in the 1998 financial statements have been reclassified
to conform to 1999 presentation. These reclassifications had no effect
on previously reported net income or shareholders' equity.
8
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS - FIRST QUARTER
NET SALES for the quarter and six month periods increased 8% and 3%,
respectively. Sales to advertising specialty (ASI) dealers and to retail golf
customers accounted for the increases during each period while sales to
wholesale distributors were lower in both periods due to business consolidations
and high inventory levels at promotional products (PPAI) distributors. Industry
research reports indicated that inventory levels began to moderate late in the
second quarter, and the Company experienced increased order booking rates at
that time. Sales of the Company's Page & Tuttle(R) golf line introduced to the
golf market in early 1998 and expanded into the ASI market in early 1999
represented 11% of sales through the first six months of 1999 compared to 4% for
the same period last year.
The backlog of unfilled orders at the end of the second quarter was
approximately $2,200,000 compared to $3,500,000 at the same time last year. The
decrease in order backlog was due primarily to distributors now placing orders
closer to the time of need in order to reduce their inventory levels and improve
cash flow. Management expects that further development of EDI programs with
wholesale distributors will contribute to improved inventory buying techniques
by these customers.
As a result of the Company's purchase of Klouda-Lenz, Inc. at the end of the
1999 first quarter, the Company recognizes COMMISSION income from the
representation of outerwear, leather, sweater and headwear apparel lines for
third parties.
GROSS PROFIT increased sharply from 1998 comparable periods. For the quarter
gross margin improved to 29.2% vs. 23.7% last year and for the six month period
improved to 30.0% from 24.6% last year. The increase in both periods was the
result of lower unit costs as a result of increased offshore sourcing, improved
margins in new product offerings and sales of the new Page & Tuttle(R) line.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSE in the quarter and six month period
increased over the same periods last year as a result of volume related expenses
such as distribution and commissions expense. In addition, the Company
experienced increased expenses in the quarter as a result of recruiting fees,
additional personnel to improve customer service, increased information systems
expense as a result of the Company's Y2K project, and increased advertising
commitments to promote the Company's new Page & Tuttle(R) line.
OPERATIONS RESTRUCTURING EXPENSE of $1,200,000 during the quarter represented
estimated one-time costs for severance of approximately 180 employees,
occupancy, legal, consulting and other expenses related to the scheduled
late-1999 closure of the Company's North Carolina manufacturing and distribution
facilities. During the first quarter of 1999 the Company recognized $100,000 for
severance of 41 employees terminated prior to the announcement of the facility
shutdown. As of the end of the
9
<PAGE>
second quarter, 129 employees had been terminated and the Company's sewing
facility was shut down. All sewing production has been transferred to mostly
non-domestic locations (See Note 5 to financial statements).
During the quarter, the Company used its bank line of credit and incurred NET
INTEREST EXPENSE after experiencing net interest income during the first quarter
of 1999 due to invested excess funds.
At the beginning of 1999, the Company had net operating loss carryforwards for
federal income tax purposes of approximately $19,000,000, which will begin to
expire in 2005. Due to the adoption of "Fresh Start Reporting" in 1991, the
Company recognized no benefit from operating loss carryforwards in its PROVISION
FOR INCOME TAXES but rather reflected such benefit as a direct credit to
shareholders' equity, which amount totaled $63,000 and $233,000 in the first
quarter and first six months of 1999, respectively.
CAPITAL RESOURCES AND LIQUIDITY
The financial condition of the Company is reflected in the following:
July 3, January 2,
(In thousands) 1999 1999
- -------------- ---- ----
Working capital....................................... $13,517 $14,824
Current ratio......................................... 3.3:1 4.0:1
Shareholders' equity.................................. $18,411 $16,803
As reported in the Condensed Consolidated Statements of Cash Flows, operating
activities during the first six months of 1999 consumed $635,000 of cash,
primarily the result of a $1,642,000 increase in receivables due to seasonally
low sales in the fourth quarter of 1998 and a $432,000 reduction in accounts
payable due to lower production levels resulting from the manufacturing
shutdown. These uses of cash were offset by a $680,000 increase in other
liabilities primarily due to the operations restructuring expense accrual and
other customary non-cash items such as depreciation, amortization and
utilization of the Company's net operating loss carryforwards. In late March
1999, the Company spent $1,474,000, net of $37,000 cash acquired, to purchase
Klouda-Lenz, Inc. Property, plant and equipment purchases were comprised
primarily of software upgrades related to the Company's Y2K project and
additional embroidery equipment. In June the Company completed the repurchase of
50,000 shares of its common stock.
LOOKING FORWARD
Near-term management priorities remain as follows:
- Improved customer service
- Sales growth
- Improved profitability
- Orderly shutdown of its North Carolina facility, transition to
additional offshore sourcing and start-up of a new distribution
center in Tennessee.
10
<PAGE>
In addition to restructuring expense of $1,300,000 already recognized for the
shutdown of its North Carolina manufacturing and distribution facilities,
management expects to incur additional expenses of approximately $400,000 at the
new distribution center location during the last six months of 1999. These costs
will relate primarily to training, relocation costs and asset transfers.
Management estimates annual savings of $1,300,000 before tax due to the move of
the manufacturing and distribution facility, primarily the result of lower
offshore costs vs. U.S. production.
In addition to costs related to the shutdown of its North Carolina facility, the
Company will spend approximately $2,500,000 on capital projects in 1999,
primarily for outfitting the new distribution center, replacing embroidery
equipment and upgrading management information systems. Management believes that
the Company's bank line of credit and funds generated from operations will be
sufficient to meet operating and capital needs. In addition, management believes
other sources of capital are available should the need arise.
Longer-term management priorities are focused on:
- Strategic alliances with suppliers
- Strategic mergers and acquisitions
- Strategic management of brands
- Increased shareholder value
YEAR 2000
The Year 2000 issue is the result of computer programs using a two-digit format,
as opposed to four digits, to indicate the year. Computer systems based on a
two-digit format may be unable to interpret dates beyond the year 1999 which
could cause a system failure or other computer errors, leading to disruption in
operations.
Readiness:
The Company has a Year 2000 Project Team, whose objective is to determine and
assess the risks of the Year 2000 issue and plan actions to minimize those
risks. The Project Team leader reports to a member of the Company's Management
Information Systems Steering Committee, which is responsible for the overall
direction and development of the Company's information systems strategy. The
Project Team is comprised of a key member from each of the Company's
organizational departments.
The Project Team identified, inventoried and cataloged information technology
(IT) systems and non-IT systems, equipment and processes used by the Company and
then researched each one to determine the vulnerability to date-sensitive
transactions. This process is essentially completed. In addition, the Project
Team assessed the risk on the Company of any Year 2000 non-compliance by any key
customer, which could adversely affect the Company's future revenues, or
supplier of goods and services, which could adversely affect the Company's
future availability of product for sale. This assessment included questionnaires
sent to and other communications with each of the key customers and suppliers.
The Project Team is currently following up on any non-responses to the
questionnaires.
11
<PAGE>
The Company uses primarily licensed software products in its operations with a
significant portion of processes and transactions centralized in one particular
software package. During the second quarter of 1999, the Company upgraded to the
current version of this software which provides additional functionality and is
Y2K compliant. The Company has upgraded other licensed software products which
interface with this central software package to Y2K compliant versions,
including primarily warehouse and distribution operations and demand forecasting
software. Internally developed systems are limited primarily to management
reporting systems and electronic data interface with a few key customers and its
sales representative organization.
Costs:
Approximately $400,000 of incremental costs are anticipated and will be
comprised primarily of outside consulting, programming and training costs in
addition to the purchase costs of software upgrades and the installation of new
hardware. Through the first six months of 1999, approximately 75% of the
anticipated costs had been incurred. Based on its current assessment, management
does not expect any material adverse impact on the Company's financial condition
or results of operations as a result of costs associated with Year 2000
compliance, and will follow established Company policy in accounting for such
costs as capital or expense.
Risks:
The Company is exercising its best efforts to identify and remedy any potential
Year 2000 exposures within its control. It is directing significant resources in
manpower, services, and equipment to upgrade its internal systems and to
identify any potential Year 2000 problems with key suppliers and customers.
However, the Company relies heavily on telecommunications and other essential
utilities which, to a significant extent, are beyond the immediate control of
the Company. Risks range from slight delays and inefficiencies in data
processing and business interruptions at small customers and suppliers to, in a
worst case scenario, extensive and costly inability to process data, and
business interruptions at certain key customers and suppliers, which could
result in lost sales and limited product availability, respectively.
Primary risks to the Company are in the following areas:
* Year 2000 non-compliance by certain key customers, which could adversely
affect the Company's revenues in the year 2000.
* Year 2000 non-compliance by certain key suppliers, which could adversely
affect the Company's availability of inventory for sale in the year 2000.
* Readiness of public utilities which supply essential services such as
telecommunications, electricity and gas.
Contingency Plans:
Contingency plans to protect the Company from Year 2000-related interruptions
are not final and will, to a large extent, depend on the findings of the Year
2000 Project Team's identification, cataloging and research activities.
Contingency plans will likely include, but not be limited to, identification of
manual systems required for less critical computerized systems and
identification of alternate suppliers and additional customers, where
appropriate.
12
<PAGE>
While the Company anticipates achieving Year 2000 compliance in a timely manner,
there can be no assurance that all processes will be efficient, that no revenues
will be lost, or that no sources of supply will be interrupted. However, the
Company believes that its planning and action efforts to date will help to
minimize any disruption.
CAUTIONARY STATEMENT
Statements included in this Management's Discussion and Analysis of Financial
Condition and Results of Operations, elsewhere in Form 10-Q of which this is a
part, and in future filings by the Company with the Securities and Exchange
Commission, in the Company's press releases and in oral statements made with the
approval of an authorized executive officer which are not historical or current
facts are "forward-looking statements" made pursuant to the safe harbor
provisions of the Private Securities Litigation Reform Act of 1995 and are
subject to certain risks and uncertainties that could cause actual results to
differ materially from historical earnings and those presently anticipated or
projected. The Company wishes to caution readers not to place undue reliance on
any such forward-looking statements, which speak only as of the date made. The
following important factors, among others, in some cases have affected and in
the future could affect the Company's actual results and could cause the
Company's actual financial performance to differ materially from that expressed
in any forward-looking statement: (i) competitive conditions that currently
exist, including the entry into the market by a number of competitors with
significantly greater financial resources than the Company, are expected to
continue, placing pressure on selling prices which could adversely impact sales
and gross margins; (ii) the inability to complete the closing of the Company's
North Carolina manufacturing and distribution center facilities on schedule and
successfully complete the transition to additional offshore sourcing and a new
distribution center facility could adversely impact the Company's sales; (iii)
the inability to carry out marketing and sales plans would have a materially
adverse impact on the Company's projections; (iv) the Company is the licensee of
the Munsingwear(R) brand and maintaining a harmonious working relationship with
the licensor is important for continued successful development of the special
markets business; (v) as a licensee, the Company is dependent on the licensor to
adequately promote the brand and defend it from trademark infringement; and (vi)
the possible events described above under Year 2000 as Risks could, if they
materialize, adversely impact financial performance.
13
<PAGE>
ITEM 3. QUALITATIVE AND QUANTITIVE DISCLOSURES ABOUT
MARKET RISK
MARKET RISK
Market risk is the potential loss arising from adverse changes in market rates
and prices, such as foreign currency exchange rates, interest rates and
commodity futures pricing. The Company is exposed to various market risks,
including fluctuations in foreign currency exchange rates, interest rates and
cotton prices. The Company does not enter into derivatives or other financial
instruments for trading, speculative or hedging purposes.
The Company follows certain practices to manage market risk. Contracts for the
purchase of goods from offshore suppliers are negotiated in U.S. dollars, which
tends to minimize the potential for short-term loss due to adverse changes in
foreign currency exchange rates. The Company invests excess funds in U.S.
government securities with maturities of 30 days or less, minimizing the effect
of short-term interest rate changes on investments. The Company's products are
made chiefly of cotton, the price of which is effected by world-wide commodity
futures markets. The Company negotiates fabric purchases for twelve-month
intervals which minimize the effect of short-term fluctuations in the price of
cotton.
14
<PAGE>
PREMIUMWEAR, INC.
PART II: OTHER INFORMATION
Item 4: Submission of Matters to a Vote of Security Holders:
On May 19, 1999 the Company held its Annual Meeting of Shareholders.
At the meeting, the following actions were taken:
(a) (i) The following persons were elected to the Company's Board of
Directors:
Votes For Votes Withheld
--------- --------------
Keith A. Benson 2,241,466 25,521
Thomas D. Gleason 2,241,666 25,321
Timothy C. Klouda 2,241,616 25,371
David E. Berg 2,241,656 25,331
Alan W. Kosloff 2,239,316 27,671
(ii) The following directors' term of office continued after the
meeting:
C. Derek Anderson
Gerald E. Magnuson
Mark B. Vittert
(b) The Company's stockholders approved the Company's 1999 Stock
Plan which authorizes 120,000 shares of Common Stock to be
available for the granting of awards in the form of stock
options and restricted stock. The vote was 1,872,714 shares
voting in favor, 383,766 shares against, and 10,507 shares
abstaining or subject to broker non-votes.
Item 5: Other Information
At the Company's Annual Meeting on May 19, 1999, it was announced that
David E. Berg, President and Chief Operating Officer of the Company,
would become Chief Executive Officer effective July 5, 1999. Thomas D.
Gleason will continue as Chairman of the Board.
Item 6: Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 27: Financial Data Schedule
(b) No reports on Form 8-K were filed during the period.
* * * * *
15
<PAGE>
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.
PremiumWear, Inc.
-----------------------------------------
(Registrant)
Date: August 13, 1999 /s/ David E. Berg
----------------- -----------------------------------------
David E. Berg
President & CEO
/s/James S. Bury
-----------------------------------------
James S. Bury
Vice President of Finance
Principal Accounting Officer
16
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-01-2000
<PERIOD-END> JUL-03-1999
<CASH> 334
<SECURITIES> 0
<RECEIVABLES> 8,013
<ALLOWANCES> 631
<INVENTORY> 9,345
<CURRENT-ASSETS> 19,338
<PP&E> 6,517
<DEPRECIATION> 4,821
<TOTAL-ASSETS> 24,927
<CURRENT-LIABILITIES> 5,821
<BONDS> 0
0
0
<COMMON> 26
<OTHER-SE> 18,385
<TOTAL-LIABILITY-AND-EQUITY> 24,927
<SALES> 13,986
<TOTAL-REVENUES> 14,379
<CGS> 9,909
<TOTAL-COSTS> 9,909
<OTHER-EXPENSES> 4,242
<LOSS-PROVISION> 23
<INTEREST-EXPENSE> 27
<INCOME-PRETAX> 190
<INCOME-TAX> 75
<INCOME-CONTINUING> 115
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 115
<EPS-BASIC> 0.04
<EPS-DILUTED> 0.04
</TABLE>
