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 June 30, 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:
<TABLE>
<CAPTION>
Date Class Shares Outstanding
---- ----- ------------------
<S> <C> <C>
June 30, 1996 Common Stock 14,476,771
</TABLE>
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<TABLE>
<CAPTION>
WORLDTEX, INC.
INDEX
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Page Number
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PART I - Financial Information
<S> <C>
Consolidated Balance Sheets at June 30, 1
1996 (Unaudited) and December 31, 1995
Consolidated Statements of Income 2
(Unaudited) for the Six Months and Three Months Ended
June 30, 1996 and 1995
Consolidated Statements of Cash Flows 3
(Unaudited) for the Six Months Ended June 30, 1996 and 1995
Notes to Consolidated Financial 4
Statements (Unaudited)
Management's Discussion and Analysis of 5-6
Financial Condition and Results of Operations
PART II - Other Information 7
</TABLE>
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<TABLE>
<CAPTION>
WORLDTEX, INC.
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
June 30, December 31,
1996 1995
---- ----
ASSETS (Unaudited)
<S> <C> <C>
Current assets:
Cash $ 2,850 $ 1,845
Accounts and notes receivable, less allowance for doubtful accounts
of $2,819 in 1996 and $2,623 in 1995 42,355 38,619
Inventories:
Raw materials 13,131 12,728
Work-in-process 6,426 5,429
Finished goods 15,364 15,503
Prepaid expenses and other current assets 2,259 1,756
---------- ----------
Total current assets 82,385 75,880
Property, plant and equipment, at cost:
Land 2,466 2,538
Buildings and leasehold improvements 29,492 29,729
Machinery and equipment 90,031 84,598
---------- ----------
121,989 116,865
Less accumulated depreciation and amortization 33,762 32,874
---------- ----------
Property, plant and equipment - net 88,227 83,991
Other assets 4,994 4,724
Cost in excess of net assets of acquired businesses, net of accumulated
amortization of $6,568 in 1996 and $6,126 in 1995 28,438 29,794
---------- ----------
$ 204,044 $ 194,389
========== ==========
<PAGE>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current installments of long-term debt $ 1,300 $ 2,179
Accounts and notes payable - trade and other liabilities 29,740 25,510
Income taxes payable 1,337 3,045
---------- ----------
Total current liabilities 32,377 30,734
Long-term debt 74,621 69,441
Deferred income taxes 15,984 15,275
---------- ----------
Total liabilities 122,982 115,450
Stockholders' equity:
Preferred stock - -
Common stock 147 147
Paid-in capital 29,918 29,913
Retained earnings 51,899 45,973
Cumulative foreign translation adjustment 9 3,817
Treasury stock, at cost (911) (911)
---------- ----------
Total stockholders' equity 81,062 78,939
Commitments and contingencies
$ 204,044 $ 194,389
========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
WORLDTEX, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Dollars and shares in thousands except per share amounts)
UNAUDITED
Six Months Ended Three Months Ended
June 30, June 30,
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales $ 105,039 $ 95,495 $ 53,140 $ 49,100
Cost of goods sold 85,014 78,621 42,861 40,495
--------- --------- --------- ---------
Gross profit 20,025 16,874 10,279 8,605
Selling & administration expense 7,948 7,464 4,108 3,840
--------- --------- --------- ---------
Operating profit 12,077 9,410 6,171 4,765
Interest expense (2,803) (2,523) (1,273) (1,242)
Other income (expense) - net 227 (85) 224 103
--------- --------- --------- ---------
Income before income taxes 9,501 6,802 5,122 3,626
Provision for income taxes 3,575 2,304 1,896 1,266
--------- --------- --------- ---------
Net income $ 5,926 $ 4,498 $ 3,226 $ 2,360
========= ========= ========= =========
Net income per share $ 0.41 $ 0.31 $ 0.22 $ 0.16
========= ========= ========= =========
Weighted average shares outstanding 14,571 14,524 14,592 14,569
========= ========= ========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
WORLDTEX, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
UNAUDITED
Six Months Ended
June 30,
1996 1995
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income $ 5,926 $ 4,498
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 2,846 2,878
Provision for losses on accounts receivable 251 218
Deferred income taxes 1,165 646
Change in assets and liabilities:
Accounts and notes receivable (5,521) (6,259)
Inventories (2,180) 2,633
Prepaid expenses and other current assets (576) (928)
Accounts and notes payable - trade and other current liabilities 5,093 1,169
Income taxes payable (1,527) (1,466)
-------- --------
Net cash provided by operating activities 5,477 3,389
-------- --------
Cash flows from investing activities:
Capital expenditures (9,028) (3,117)
Purchase of Fibrexa, S.A., net of cash acquired - (3,972)
Other investing activities (211) 85
-------- --------
Net cash used in investing activities (9,239) (7,004)
-------- --------
Cash flows from financing activities:
Borrowings under line of credit arrangements 1,153 854
Payments under line of credit arrangements (1,072) (291)
Borrowings under revolving credit facility 57,970 14,900
Payments on revolving credit facility (52,800) (13,700)
Stock issued or (reacquired) 5 -
Other debt payments and financing activities (643) 500
-------- --------
Net cash provided by financing activities 4,616 2,353
-------- --------
Effects of exchange rate changes on cash 154 365
-------- --------
Net increase (decrease) in cash 1,005 (897)
Cash at beginning of year 1,845 3,151
-------- --------
Cash at end of period $ 2,850 $ 2,254
======== ========
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest $ 2,725 $ 3,433
======== ========
Income taxes $ 4,573 $ 1,660
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
<PAGE>
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.
<PAGE>
WORLDTEX, INC
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Results of Operations
- ---------------------
Sales for the six months ended June 30, 1996 were $105 million and net income
was $5.9 million, compared with sales of $95.5 million and net income of $4.5
million for the comparable period in 1995. Earnings per share were $.41 for the
1996 six month period compared with $.31 in 1995. Sales for the quarter ended
June 30, 1996 were $53.1 million and net income was $3.2 million, compared to
sales of $49.1 million and net income of $2.4 million for the comparable 1995
period. Earnings per share were $.22 for the second quarter of 1996, compared to
$.16 per share in the 1995 period.
The following table sets forth the percentages which certain income and expense
items bear to net sales:
<TABLE>
<CAPTION>
Six Months Ended Three Months Ended
June 30, June 30,
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales 100.0% 100.0% 100.0% 100.0%
----- ----- ----- -----
Gross margin 19.1% 17.7% 19.3% 17.5%
Selling and administration expense 7.6% 7.8% 7.7% 7.8%
----- ----- ----- -----
Operating profit 11.5% 9.9% 11.6% 9.7%
Interest expense (2.7%) (2.7%) (2.4%) (2.5%)
Other income (expense) - net .2% (.1%) .4% .2%
----- ----- ----- -----
Income before income taxes 9.0% 7.1% 9.6% 7.4%
----- ----- ----- -----
</TABLE>
For the six months ended June 30, 1996, sales increased by $9.5 million or 10%
compared to the six months ended June 30, 1995. For the quarter ended June 30,
1996, sales increased by $4 million or 8% compared to the 1995 quarter.
Sales from North American operations decreased 11.3% and 14.9% for the six
months and the three months ended June 30, 1996 from the corresponding periods
in 1995. Sales from French operations increased 12.2% and 10.6% for the six
months and three months ended June 30, 1996 from the corresponding periods in
1995. Sales from South American operations, acquired by the Company in April,
1995, were 7.7% and 8.7% of the consolidated sales for the six months and the
three months ended June 30, 1996.
The volume decreases for the six and three months of 1996 in North America
resulted primarily because of 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 periods due
primarily to increased demand at the retail level for woven fabrics containing
covered yarn.
<PAGE>
WORLDTEX, INC
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
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 was spread over a higher sales base.
Interest expense for the six months and the three months ending June 30, 1996,
increased due to increased borrowings of revolving credit for capital
requirements within the U.S. operations and the increased borrowings resulting
from the acquisition of Fibrexa.
The Company had an effective income tax rate of 37.6% and 37.0% for the six
months and the three months ended June 30, 1996 compared to 33.9% and 34.9% for
the same periods 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 June 30, 1996, $17.8 million was outstanding under the Company's Revolving
Credit Agreement and approximately $17.2 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 $15.1 million at June 30, 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 $2.8 million at June 30, 1996, representing a net increase of $1
million for the six months then ended. Cash flows from operating activities and
from financing activities are the principal indicators of the Company's
liquidity. During the first six months of 1996, $5.5 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 six
months of 1996, financing activities contributed $4.6 million, reflecting
routine borrowings and repayments under the Company's lines of credit and
revolving credit facility. During the first six months of 1996, $9.2 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 million at June 30, 1996, and $45.1 million at December
31, 1995, reflecting an increase of $4.9 million and current ratios of 2.5 at
June 30, 1996 and December 31, 1995.
<PAGE>
WORLDTEX, INC.
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
- ------- ---------------------------------------------------
The Company held its annual meeting of stockholders on May 16, 1996. At the
meeting, the following persons were elected as directors of the Company by the
votes indicated below:
<TABLE>
<CAPTION>
Authority
Name For Withheld
- ---- ---------- --------
<S> <C> <C>
John B. Fraser 12,106,951 10,175
Michael B. Wilson 12,107,251 9,875
Willi Roelli 12,106,901 10,225
</TABLE>
In addition, the terms as directors of the Company of Sidney B. Becker, Claude
D. Egler, Austin List, Barry D. Setzer, Richard J. Mackey and John K. Ziegler
continued after the annual meeting.
Item 6. Exhibits and Reports on Form 8-K
- ------- --------------------------------
(a) Exhibits
--------
Exhibit No. Description
----------- -----------
11.1 Computation of net income per common and common
equivalent shares
27.1 Financial Data Schedule (filed with EDGAR only)
(b) Reports on Form 8-K
-------------------
During the quarter ended June 30, 1996, the Company did not file any
reports on Form 8-K.
<PAGE>
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.
WORLDTEX, INC.
(Registrant)
Date August 12, 1996 By /s/ Richard J. Mackey
---------------------
Richard J. Mackey
Chairman of the Board
and Chief Financial Officer
<PAGE>
<TABLE>
<CAPTION>
INDEX TO 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)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT 11.1
WORLDTEX, INC.
COMPUTATION OF EARNINGS PER SHARE
(Dollars in thousands except per share amounts)
Six Months Ended Three Months Ended
June 30, June 30,
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net income $ 5,926 $ 4,498 $ 3,226 $ 2,360
=========== =========== =========== ===========
Shares:
Weighted average number of shares
outstanding 14,475,571 14,475,571 14,475,571 14,475,571
Assumed exercise of options 95,394 48,121 115,948 93,796
----------- ----------- ----------- -----------
Total average number of common and common
equivalent shares used for primary
computation 14,523,692 14,591,519 14,569,367 14,570,965
=========== =========== =========== ===========
Primary earnings per share $ .41 $ .31 $ .22 $ .16
=========== =========== =========== ===========
Shares:
Weighted average number of shares
outstanding 14,475,571 14,475,571 14,475,571 14,475,571
Assumed exercise of options 128,510 122,180 128,510 122,180
----------- ----------- ----------- -----------
Total average number of common and common
equivalent shares used for fully diluted
computation 14,604,081 14,597,751 14,604,081 14,597,751
=========== =========== =========== ===========
Fully diluted earnings per share $ .41 $ .31 $ .22 $ .16
=========== =========== =========== ===========
</TABLE>
Earnings per share are calculated based upon the weighted average number of
common shares outstanding and common equivalent shares during the year.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM WORLDTEX,
INC. FORM 10-Q FOR THE PERIOD ENDED JUNE 30, 1996 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1996
<CASH> 2,850
<SECURITIES> 0
<RECEIVABLES> 45,174
<ALLOWANCES> 2,819
<INVENTORY> 34,921
<CURRENT-ASSETS> 82,385
<PP&E> 121,989
<DEPRECIATION> 33,762
<TOTAL-ASSETS> 204,044
<CURRENT-LIABILITIES> 32,377
<BONDS> 74,621
0
0
<COMMON> 147
<OTHER-SE> 80,915
<TOTAL-LIABILITY-AND-EQUITY> 204,044
<SALES> 105,039
<TOTAL-REVENUES> 105,039
<CGS> 85,014
<TOTAL-COSTS> 85,014
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 251
<INTEREST-EXPENSE> 2,803
<INCOME-PRETAX> 9,501
<INCOME-TAX> 3,575
<INCOME-CONTINUING> 5,926
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,926
<EPS-PRIMARY> .41
<EPS-DILUTED> .41
</TABLE>
