FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
Commission file number 1-11438
WORLDTEX, INC.
(Exact name of registrant as specified in its charter)
Delaware 56-1789271
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
212 12th Avenue, N.E., Hickory, North Carolina 28601
(Address of principal executive offices) (Zip Code)
(704) 328-5381
(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
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date:
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<CAPTION>
Date Class Shares Outstanding
- - -------------- ------------ ------------------
<S> <C> <C>
March 31, 1996 Common Stock 14,475,571
</TABLE>
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<TABLE>
<CAPTION>
WORLDTEX, INC.
INDEX
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Page Number
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<S> <C> <C>
PART I - Financial Information
Consolidated Balance Sheets at March 31, 1996 (Unaudited) 1
and December 31, 1995
Consolidated Statements of Income (Unaudited) for the 2
Three Months Ended March 31, 1996 and 1995
Consolidated Statements of Cash Flows (Unaudited) for the 3
Three Months Ended March 31, 1996 and 1995
Notes to Consolidated Financial Statements (Unaudited) 4
Management's Discussion and Analysis of Financial 5-6
Condition and Results of Operations
PART II - Other Information 7
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<CAPTION>
WORLDTEX, INC.
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
March 31, December 31,
1996 1995
-------- ------------
(Unaudited)
ASSETS
<S> <C> <C>
Current assets:
Cash $ 4,497 $ 1,845
Accounts and notes receivable, less allowance
for doubtful accounts of $2,653 in 1996 and
$2,623 in 1995 40,858 38,619
Inventories:
Raw materials 12,083 12,728
Work-in-process 6,270 5,429
Finished goods 14,172 15,503
Prepaid expenses and other current assets 1,697 1,756
--------- ---------
Total current assets 79,577 75,880
Property, plant and equipment, at cost:
Land 2,511 2,538
Buildings and leasehold improvements 29,382 29,729
Machinery and equipment 84,662 84,598
--------- ---------
116,555 116,865
Less accumulated depreciation and amortization 33,103 32,874
--------- ---------
Property, plant and equipment - net 83,452 83,991
Other assets 5,582 4,724
Cost in excess of net assets of acquired businesses,
net of accumulated amortization of $6,345 in 1996
and $6,126 in 1995 29,059 29,794
--------- ---------
$ 197,670 $ 194,389
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current installments of long-term debt $ 1,413 $ 2,179
Accounts and notes payable - trade and other liabilities 24,440 25,510
Income taxes payable 3,486 3,045
--------- ---------
Total current liabilities 29,339 30,734
Long-term debt 73,544 69,441
Deferred income taxes 15,499 15,275
--------- ---------
Total liabilities 118,382 115,275
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Stockholders' equity:
Preferred stock - -
Common stock 147 147
Paid-in capital 29,913 29,913
Retained earnings 48,673 45,973
Cumulative foreign translation adjustment 1,466 3,817
Treasury stock, at cost (911) (911)
--------- ---------
Total stockholders' equity 79,288 78,939
Commitment and contingencies
--------- ---------
$ 197,670 $ 194,389
========= =========
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See accompanying notes to consolidated financial statements.
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<CAPTION>
WORLDTEX, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Dollars and shares in thousands except per share amounts)
UNAUDITED
Three Months Ended
March 31,
1996 1995
---- ----
<S> <C> <C>
Net sales $ 51,899 $ 46,395
Cost of goods sold 42,153 38,126
-------- --------
Gross profit 9,746 8,269
Selling & administration expense 3,840 3,624
-------- --------
Operating profit 5,906 4,645
Interest expense (1,530) (1,281)
Other income (expense) - net 3 (188)
-------- --------
Income before income taxes 4,379 3,176
Provision for income taxes 1,679 1,038
Net income $ 2,700 $ 2,138
======== ========
Net income per share $ 0.19 $ 0.15
======== ========
Weighted average shares outstanding 14,548 14,476
======== ========
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See accompanying notes to consolidated financial statements.
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<CAPTION>
WORLDTEX, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
UNAUDITED
Three Months Ended
March 31,
1996 1995
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income $ 2,700 $ 2,138
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 1,306 1,327
Provision for losses on accounts receivable 82 35
Deferred income taxes 464 350
Change in assets and liabilities:
Accounts and notes receivable (3,190) (2,871)
Inventories 619 1,400
Prepaid expenses and other current assets 16 (930)
Accounts and notes payable -
trade and other current liabilities (599) 1,515
Income taxes payable 533 254
------- -------
Net cash provided by operating activities 1,951 2,854
======= =======
Cash flows from investing activities:
Capital expenditures (1,955) (1,655)
Other investing activities (826) (155)
------- -------
Net cash used in investing activities (2,781) (1,810)
------- -------
Cash flows from financing activities:
Borrowings under line of credit arrangements 1,035 -
Payments under line of credit arrangements (1,000) -
Borrowings under revolving credit facility 22,890 6,270
Payments on revolving credit facility (19,360) (5,090)
Other debt payments and financing activities (48) 437
------- -------
Net cash provided by financing activities 3,517 1,617
------- -------
Effects of exchange rate changes on cash (35) 539
------- -------
Net increase in cash 2,652 3,200
Cash at beginning of year 1,845 3,151
------- -------
Cash at end of period $ 4,497 $ 6,351
======= =======
Supplemental disclosure of cash flow information:
Cash paid (received) during the period for:
Interest $ 1,531 $ 1,892
======= =======
Income taxes $ 1,014 $ (311)
======= =======
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See accompanying notes to consolidated financial statements.
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WORLDTEX, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
UNAUDITED
1. In the opinion of the Company, the accompanying unaudited consolidated
financial statements contain all adjustments (consisting of only normal
recurring accruals) necessary to present fairly the financial position and
results of operations for the interim periods reported hereon. It is
suggested that these consolidated financial statements be read in
conjunction with the consolidated financial statements and the notes
thereto included in the Company's annual report for the fiscal year ended
December 31, 1995. The December 31, 1995 amounts included in the financial
statements are derived from December 31, 1995 audited financial statements
and notes thereto.
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WORLDTEX, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Results of Operations
- - ---------------------
Sales for three months ended March 31, 1996 were $51.9 million and earnings
were $2.7 million compared with sales of $46.4 million and earnings of $2.1
million for the comparable period in 1995. Earnings per share were $.19
compared with $.15 in 1995.
The following table sets forth percentages which certain income and expense
items bear to net sales:
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<CAPTION>
Three Months Ended
March 31,
1996 1995
---- ----
<S> <C> <C>
Net sales 100.0% 100.0%
------ ------
Gross margin 18.8% 17.8%
Selling and administration expense 7.4% 7.8%
------ ------
Operating profit 11.4% 10.0%
Interest expense (3.0%) (2.8%)
Other income (expense) - net - (.4%)
------ ------
Income before income taxes 8.4% 6.8%
------ ------
</TABLE>
For the three months ended March 31, 1996, sales increased by $5.5 million or
11.9% compared to the three months ended March 31, 1995.
Sales from North American operations decreased 7.4% for three months ended
March 31, 1996 from the corresponding period in 1995. Sales from French
operations increased 13.9% for the three months ended March 31, 1996 from the
corresponding period in 1995. Fibrexa, Ltda., a manufacturer of covered yarn
based in Bogota, Colombia, acquired by the Company in April, 1995, had sales of
$3.5 million for the three months ended March 31, 1996 or 6.7% of consolidated
sales.
The volume decreases for the first quarter of 1996 in North America resulted
primarily because slower retail sales for pantyhose that contain covered yarn
and continued competitive pressures caused by excess capacity. Sales from the
French operations increased over the prior year same period due primarily to
increased demand at the retail level for woven fabrics containing covered yarn.
The increased value of the French Franc over the U.S. dollar also contributed
to this improvement.
Gross profit margins increased primarily because the Company's fixed expenses
were spread over higher sales. The increase was also attributable to the
margin contributed by the Colombian operation. Selling and administrative
expenses decreased as a percentage of net sales because the fixed component of
these expenses were spread over a higher sales base.
Interest expense for the three months ending March 31, 1996, increased due to
increased borrowings of revolving credit for capital requirements within the
U.S. operations and increased borrowings resulting from the acquisition of
Fibrexa.
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WORLDTEX, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The Company had an effective income tax rate of 38.3% for the three months
ended March 31, 1996 compared to 32.7% for the same period in 1995. This
increase results primarily from an increased tax rate in France from 33.33% to
36.67% enacted in July 1995.
Liquidity; Capital Resources
- - ----------------------------
The Company meets both its long-term and short-term liquidity needs through
internally generated funds and outside borrowings.
At March 31, 1996, $16.2 million was outstanding under the Company's Revolving
Credit Agreement and approximately $18.8 million was available for future
borrowings. In addition, Filix Lastex, S.A., Rubyco (1987), Inc., and Fibrexa
Ltda., had available approximately $17.9 million, $1.1 million, and $1.6
million, respectively, under various bank lines of credit and overdraft
facilities. The most restrictive covenant of the Company's Credit Agreement
and Note Agreement limit short-term borrowings by the Company's subsidiaries to
a total of approximately $14.6 million at March 31, 1996. Worldtex believes
that these lines of credit, together with internally generated funds and access
to other financing sources, will provide sufficient liquidity for the Company's
expected short-term and long-term cash requirements.
Cash totaled $4.5 million at March 31, 1996, representing a net increase of
$2.7 million for the three months then ended. Cash flows from operating
activities and from financing activities are the principal indicators of the
Company's liquidity. During the first three months of 1996, $2 million was
generated from operating activities as a result of net income, adjusted for the
effects of depreciation and amortization and changes in the balances of
receivables, payables, inventories and other assets and liabilities. During
the first three months of 1996, financing activities contributed $3.5 million,
reflecting routine borrowings and repayments under the Company's lines of
credit and revolving credit facility. During the first three months of 1996,
$2.8 million was applied toward the purchase of additional equipment and other
investing activities, including the upgrading of certain equipment. The
Company anticipates that its capital expenditures during 1996 will aggregate
approximately $11.5 million, primarily for the purchase of equipment.
Working capital was $50.2 million at March 31, 1996, and $45.1 million at
December 31, 1995, reflecting an increase of $5.1 million and current ratios of
2.7 and 2.5 respectively, at March 31, 1996 and December 31, 1995.
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<CAPTION>
WORLDTEX, INC.
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
- - -----------------------------------------
(a) Exhibits
Exhibit No. Description
----------- -----------
<S> <C>
11.1 Computation of net income per common
and common equivalent shares.
27.1 Financial Data Schedule (filed with
EDGAR only)
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(b) Reports on Form 8-K
During the quarter ended March 31, 1996, the Company did not file
any reports on Form 8-K.
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SIGNATURE
Pursuant to the requirements of the Securities and Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
WORLDTEX, INC.
(Registrant)
Date May 14, 1996 By /s/ Richard J. Mackey
------------ ---------------------
Richard J. Mackey
Chairman of the Board
and Chief Financial Officer
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<CAPTION>
EXHIBIT 11.1
WORLDTEX, INC.
COMPUTATION OF EARNINGS PER SHARE
(Dollars in thousands except per share amounts)
UNAUDITED
Three Months Ended
March 31,
1996 1995
---- ----
<S> <C> <C>
Net income $ 2,700 $ 2,138
=========== ===========
Shares:
Weighted average number of shares
outstanding 14,475,571 14,475,571
Assumed exercise of options 71,986 -
----------- -----------
Total average number of common and
common equivalent shares used for
primary computation 14,547,557 14,475,571
=========== ===========
Primary earnings per share $ 0.19 $ 0.15
=========== ===========
Shares:
Weighted average number of shares
outstanding 14,475,571 14,475,571
Assumed exercise of options 59,858 -
----------- -----------
Total average number of common and
common equivalent shares used for
fully diluted computation 14,535,429 14,475,571
=========== ===========
Fully diluted earnings per share $ 0.19 $ 0.15
=========== ===========
Earnings per share are calculated based upon the weighted average number of
common shares of outstanding and common equivalent shares during the year.
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<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM WORLDTEX,
INC. FORM 10-Q FOR THE PERIOD ENDED MARCH 31, 1996 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> MAR-31-1996
<CASH> 4,497
<SECURITIES> 0
<RECEIVABLES> 43,511
<ALLOWANCES> 2,653
<INVENTORY> 32,525
<CURRENT-ASSETS> 79,577
<PP&E> 116,555
<DEPRECIATION> 33,103
<TOTAL-ASSETS> 197,670
<CURRENT-LIABILITIES> 29,339
<BONDS> 73,544
0
0
<COMMON> 147
<OTHER-SE> 79,141
<TOTAL-LIABILITY-AND-EQUITY> 197,670
<SALES> 51,899
<TOTAL-REVENUES> 51,899
<CGS> 42,153
<TOTAL-COSTS> 42,153
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 82
<INTEREST-EXPENSE> 1,530
<INCOME-PRETAX> 4,379
<INCOME-TAX> 1,679
<INCOME-CONTINUING> 2,700
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,700
<EPS-PRIMARY> .19
<EPS-DILUTED> .19
</TABLE>
