SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------------
FORM 10-K
-----------------------
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 For the
fiscal year ended December 31, 1996
[ ] 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 1-11438
WORLDTEX, INC.
(Exact name of registrant as specified in charter)
DELAWARE 56-1789271
(State of Incorporation) (I.R.S. Employer Identification No.)
212-12th Avenue, N.E., Hickory, North Carolina 28601
(Address of principal executive offices)
704-328-5381
(Telephone Number)
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
------------------- --------------------------------
Common stock, par value $.01 per share New York Stock Exchange, Inc.
Preferred stock purchase rights New York Stock Exchange, Inc.
Securities registered pursuant to Section 12(g) of the Act:
None
(Cover sheet continued on next page)
<PAGE>
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 by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ X ]
-----
As of March 7, 1997: 14,403,571 shares of Common Stock were outstanding; and the
aggregate market value of shares held by non-affiliates was $120,639,249. (For
these purposes, a reported closing market price of $8.88 per share on March 7,
1997 has been used and "affiliates" have been arbitrarily determined to be all
directors and executive officers, although the Company does not acknowledge that
any such person is actually an "affiliate" within the meaning of the federal
securities laws.)
Documents incorporated by reference: definitive proxy statement for 1997 Annual
Meeting of Stockholders (Part III).
<PAGE>
PART I
Item 1. Business
- ------- --------
Worldtex, Inc. ("Worldtex" or the "Company") is a holding company
engaged through its subsidiaries in the manufacture of covered elastic yarn,
which is used to manufacture hosiery products and other apparel items. Worldtex
is a Delaware corporation organized in July 1992 to acquire the covered yarn
manufacturing operations of Willcox & Gibbs, Inc., a New York corporation
("W&G"). Prior to November 12, 1992, Worldtex was a wholly owned subsidiary of
W&G. On that date, W&G declared a dividend of one share of Worldtex Common Stock
for each share of W&G Common Stock outstanding on November 23, 1992 (the
"Distribution").
Worldtex's principal subsidiaries are Regal Manufacturing Company,
Inc. ("Regal"), based in Hickory, North Carolina, Rubyco (1987), Inc.
("Rubyco"), based in Montreal, Canada, Filix Lastex, S.A. ("Filix"), based in
Troyes, France and Fibrexa, Ltda. ("Fibrexa"), based in Bogota, Colombia. W&G
acquired Regal in 1983, acquired Rubyco in 1986 and acquired Filix in 1990, and
transferred them to Worldtex in August 1992. Worldtex acquired Fibrexa as of
April 1, 1995. References herein to "Worldtex" or the "Company" for periods
prior to August 1992 shall mean the combined operations of W&G's subsidiaries
then engaged in the manufacture of covered elastic yarn.
Worldtex believes that it is one of the largest covered elastic yarn
manufacturers in the world (measured by 1996 sales), and it has a strong
position in each of the principal markets in which it operates. It believes that
Regal is one of the three largest manufacturers of covered elastic yarn in the
United States, that Filix is the largest in Europe, that Rubyco is the largest
in Canada and that Fibrexa is the largest in South America (in each case
measured by 1996 sales). Regal's and Rubyco's products are sold primarily in
their respective home countries, Filix sells principally to European Community
countries and Fibrexa sells principally to South American countries, and our
other subsidiaries. See Note 12 to Worldtex's Consolidated Financial Statements
for information relating to Worldtex's domestic and foreign operations.
The covered elastic yarn manufactured by Worldtex is produced by
wrapping material, principally nylon, polyester or cotton, around spandex or
latex rubber. The wrapping process is performed by machinery and requires
careful treatment of the materials utilized.
Worldtex's principal product is nylon covered spandex used in the
manufacture of a variety of men's, women's and children's apparel. Worldtex also
sells covered spandex and covered latex rubber for use in the manufacture of
men's, women's and children's socks. Cotton-covered spandex yarn sold by
Worldtex is used primarily in the manufacture of ladies' opaque tights and of
fashion and active-wear apparel.
Worldtex served over 1,500 customers in 1996, with no single customer
accounting for more than 10% of such sales.
Worldtex purchases a significant amount of the nylon and spandex used
in its manufacturing process from E.I. DuPont de Nemours & Company ("DuPont").
In recent years, spandex production capacity has been expanded, and Worldtex has
been able to obtain sufficient supplies to meet its customers' requirements.
Worldtex's research and development activities are directed toward
improvements in existing products and manufacturing processes and toward
development of new uses for its products. During 1996, Worldtex's expenditures
for these purposes totaled less than 1% of its sales.
While Worldtex believes that it is one of the largest covered elastic
yarn manufacturers in the world, several companies actively compete with
Worldtex, at least one of which has greater assets and financial resources than
Worldtex. Most of Worldtex's major customers do not buy exclusively from
Worldtex. Competition is based primarily on product quality, customer service
and price.
As of December 31, 1996, Worldtex had a total of approximately 1,177
employees, of whom approximately 471 were employed by Regal in the United
States, approximately 181 were employed in Canada by Rubyco, approximately 321
were employed in France by Filix and approximately 204 were employed in Colombia
by Fibrexa. A substantial amount of the covered elastic yarn sold by Filix is
produced by subcontractors, whose employees are not included in the foregoing
totals. Employees of Regal and Fibrexa are not covered by collective bargaining
agreements, and certain employees of Filix and Rubyco are covered by such
agreements. Worldtex has experienced no significant labor problems during recent
years and considers its employee relations to be good.
Item 2. Properties
- ------- ----------
Worldtex maintains its headquarters in Hickory, North Carolina, on
property owned by Regal and used for its administrative personnel.
Worldtex operates a total of twelve manufacturing plants and
distribution centers, of which seven are owned and five are leased. In general,
the Company's facilities are adequate and suitable for the purposes for which
they are utilized by the Company. The plants and distribution centers are listed
below:
<PAGE>
<TABLE>
<CAPTION>
Location Square Feet Owned/Leased Use
-------- ----------- ------------ ---
<S> <C> <C> <C>
United States:
- --------------
Hickory, NC 82,000 Owned Manufacturing Plant and
Headquarters of Regal
Hickory, NC 144,000 Owned Manufacturing Plant
Hickory, NC 41,000 Owned Manufacturing Plant
Hickory, NC 46,000 Leased Distribution Center
Hickory, NC 18,000 Leased Distribution Center
Hickory, NC 80,000 Leased Distribution Center
Canada:
- -------
Montreal, Quebec 85,000 Leased Manufacturing Plant and
Headquarters of Rubyco
France:
- -------
Troyes 48,000 Owned Distribution Center and
Headquarters of Filix
Athis 202,000 Owned Manufacturing Plant
Conde 195,000 Owned Manufacturing Plant
Le Grand Serre 94,000 Owned Manufacturing Plant
Columbia:
- ---------
Bogota 130,000 Leased Manufacturing Plant and
Headquarters of
Fibrexa
</TABLE>
Item 3. Legal Proceedings
- ------- -----------------
There are no material pending legal proceedings as of the date of this
Report to which the Company or any of its subsidiaries is a party or to which
any of their property is subject.
Item 4. Submission of Matters to a Vote of Security Holders
- ------- ---------------------------------------------------
During the last quarter of the Company's 1996 fiscal year no matters
were submitted to a vote of the Company's security holders.
<PAGE>
Item 4A. Executive Officers of the Registrant
- -------- ------------------------------------
<TABLE>
<CAPTION>
Age (as of Office & Principal Occupations
Name 12/31/96) During Last Five Years
- ------------------------- ---------- --------------------------------------------------------------
<S> <C> <C>
Richard J. Mackey 65 Chairman of the Board and Chief Financial Officer of Worldtex
(August 1992 to present); Chief Executive Officer of Worldtex
(August 1992 to May 1994); President of Rexel (May 1987 to
November 1992); Director of Rexel (1982 to 1993).
Barry D. Setzer 54 President and Chief Executive Officer of Worldtex (May 1994 to
present); President and Chief Operating Officer of Worldtex
(August 1992 to May 1994); President of Rexel's Covered Yarn
Division (September 1988 to November 1992); President (to
September 1988) and Director of Regal; Vice President of Rexel
(November 1987 to November 1992); Director of Rexel
(1983 to 1992).
A. Orrin Maldoff 63 Vice President of Worldtex (August 1992 to present); President
of Rubyco (October 1990 to present).
Kenneth W. O'Neill 52 Vice President of Worldtex (August 1992 to present); President
of Regal (August 1988 to present).
Mitchell R. Setzer 47 Treasurer and Secretary of Worldtex (August 1992 to present);
Vice President - Administration of Regal (January 1990 to
present); Treasurer of Regal (January 1989 to present).
Donald W. Pruitt 48 Controller of Worldtex (December 1995 to present).
</TABLE>
Barry D. Setzer and Mitchell R. Setzer are not related. Richard J.
Mackey and Barry D. Setzer also serve as directors of the Company.
The officers of the Company are elected annually by the Board of
Directors.
<PAGE>
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
- ------- ---------------------------------------------------------------------
The Company's Common Stock is listed on the New York Stock Exchange.
The following table sets forth the high and low per share sales prices for the
Common Stock on the New York Stock Exchange for each quarter since December 31,
1994.
<TABLE>
<CAPTION>
High Low
---- ---
<S> <C> <C>
1995:
1st Quarter $ 4.38 3.63
2nd Quarter 6.13 3.88
3rd Quarter 6.63 5.63
4th Quarter 6.50 5.25
1996:
1st Quarter 5.75 4.63
2nd Quarter 6.38 4.75
3rd Quarter 7.63 5.75
4th Quarter 8.88 7.50
1997:
1st Quarter
(through March 7) 10.13 8.88
</TABLE>
At March 7, 1997 there were approximately 1,100 holders of record of
Common Stock.
The Company has not paid any dividends since its Common Stock was
distributed in the Distribution. Future payment of cash dividends by the Company
will be dependent on such factors as business conditions, earnings and the
financial condition of the Company. The Revolving Credit Loan Agreement and the
Note Agreement to which the Company is a party restrict the payment of dividends
by the Company. Under the most restrictive of these debt agreements, $8.9
million was available for the payment of dividends and other distributions as of
December 31, 1996. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations - Liquidity; Capital Resources."
Item 6. Selected Financial Data
- ------- -----------------------
Worldtex, Inc. and Subsidiaries
-------------------------------
The following table sets forth certain financial data of Worldtex for
the five fiscal years ended December 31, 1996, which has been derived from
Worldtex's audited financial statements for such years. This data should be read
in conjunction with the Consolidated Financial Statements of Worldtex and the
Notes thereto appearing elsewhere herein. Results for 1996 and 1995 are not
directly comparable due to the acquisition of Fibrexa as of April 1, 1995. See
<PAGE>
Management's Discussion and Analysis, Item 7, for discussion of the acquisition
of Fibrexa, S.A. Historical financial information may not be indicative of
Worldtex's future performance. Earnings per share for the years ended December
31, 1996, 1995, 1994, 1993 and 1992 are calculated based upon the weighted
average number of common shares outstanding and common equivalent shares during
such year (or, in the case of 1992, for the period from November 12, 1992 to
December 31, 1992).
<TABLE>
<CAPTION>
Years Ended December 31,
-----------------------------------------------------
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
(Dollars in thousands, except per share amounts)
<S> <C> <C> <C> <C> <C>
Net Sales $207,829 187,981 164,654 152,709 174,936
Income before income taxes 17,361 10,231 8,868 11,490 11,613
Provision for income taxes 6,415 4,979 3,058 4,206 4,314
Net income 10,946 5,252 5,810 7,284 7,299
Net income per share .75 .36 .40 .50 .50
Total assets 206,032 196,065 166,405 145,996 154,339
Long-term debt $ 67,754 68,947 61,085 55,486 62,343
Cash dividends per common share - - - - -
</TABLE>
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations
-------------------------------------------------
The following table sets forth the percentage of Worldtex's sales and
operating profit (loss) accounted for by each of Worldtex's geographic areas
during the periods indicated. For purposes of determining operating profit,
parent company expenses have been allocated to each area in accordance with its
percentage of total sales. See Note 12 of the Notes to Consolidated Financial
Statements of Worldtex for additional financial information (sales, operating
profits and identifiable assets) by geographic location.
<PAGE>
<TABLE>
<CAPTION>
Years Ended December 31,
-----------------------------------------------------------------
1996 1995 1994
------------------- --------------------- ------------------
Operating Operating Operating
Sales Profit Sales Profit (Loss) Sales Profit
----- --------- ----- ------------- ----- ---------
<S> <C> <C> <C> <C> <C> <C>
North America 41% 11% 42% (1%) 54% 10%
Europe 53% 85% 54% 94% 46% 90%
South America 6% 4% 4% 7% - -
</TABLE>
Results of Operations
- ---------------------
The following table sets forth the relationship of percentages which
certain income and expense items have to net sales:
<TABLE>
<CAPTION>
Years Ended December 31,
-------------------------
1996 1995 1994
----- ----- -----
<S> <C> <C> <C>
Net Sales 100% 100% 100%
===== ===== =====
Gross margin 18.8% 16.7% 15.8%
Operating costs and expenses:
Selling & administrative 8.0 8.3 8.2
----- ----- -----
Operating profit 10.8 8.4 7.6
Interest expense 2.7 3.0 2.4
Other income - net 0.3 0.0 0.2
----- ----- -----
Income before income taxes 8.4% 5.4% 5.4%
===== ===== =====
</TABLE>
1996 vs. 1995. Worldtex's sales in 1996 increased $19.8 million, or
10.6%, when compared with 1995. Sales in the Company's European operation
increased $9.2 million, or 9.2%, compared with 1995, primarily because of
increased demand for covered yarn used by the weaving industry in Europe. The
lower value of the French Franc compared with the U.S. dollar reduced 1996 sales
by $2.6 million. In the Company's North American operations, sales increased
$5.6 million, or 6.9%, from 1995 levels, primarily because of increased demand
in non-pantyhose end uses for covered elastic yarn. Sales in the Company's South
American operation were $11.8 million (excluding $6.1 million of inter-company
sales) compared with $6.7 million in 1995 primarily due to a full year of
operation in 1996 compared with the partial year of 1995. The reduced value of
the Colombian Peso lowered 1996 sales by $1.8 million.
Worldtex's gross margin increased in 1996 to 18.8% of sales as
compared to 16.7% for 1995. This increase was primarily caused by increased
<PAGE>
sales resulting from the Company's continuing efforts to develop additional end
uses for its products, lower manufacturing costs of the Company's Colombian
operations and reduced costs associated with the 1995 restructuring.
Additionally, the Company's fixed expenses were spread over substantially higher
sales.
Selling and administrative expense increased in 1996 by $.9 million to
$16.6 million. The increase was caused principally by the increased business
levels in 1996 and the full year operation of the Colombian subsidiary acquired
in April 1995.
The increase in interest expense of $.1 million was caused primarily
by weighted average outstanding debt increasing approximately 8% but was mostly
offset by lower average interest rates.
1995 vs. 1994. Worldtex's sales in 1995 increased $23.3 million, or
14.2%, when compared with 1994. Sales in the Company's European operation
increased $24.2 million, or 31.6%, compared with 1994, primarily because of
increased demand for covered yarn used by the weaving and knitting industries in
Europe . The increased value of the French Franc over the U.S. dollar also
contributed to this improvement. In the Company's North American operations,
sales declined $7.5 million, or 8.5%, from 1994 levels, primarily because of
slower retail sales for pantyhose that contain covered yarn and continued
competitive pressures caused by excess industry capacity. Fibrexa, S.A., the
company acquired by the Company as of April 1, 1995, contributed sales of $6.6
million.
The Company recorded nonrecurring charges in 1995 of $2.6 million. A
restructuring charge of $1.7 million ($1.3 million of which was reflected as
cost of goods sold and $.4 million as selling and administrative expenses), was
recorded in the fourth quarter to take account of the closing of two facilities.
In the third quarter a reserve was increased to accommodate higher corporate
taxes in France which resulted in $.9 million in deferred tax expense.
Worldtex's gross margin increased in 1995 to 16.7% of sales as
compared to 15.8% for 1994. Gross margin increased to 17.4% before the
restructuring charge recorded in the fourth quarter which included $1.3 million
recorded as cost of goods sold. This increase in gross margin was primarily due
to improved margins of the Company's French operation, attributable to the
strong demand in Europe for the specialty yarns produced by the Company's French
subsidiary. In addition, the Company's fixed expenses were spread over
substantially higher sales.
Selling and administrative expense increased in 1995 by $2.2 million
to $15.7 million. The increase was caused principally by the increased business
levels of European operations, the acquisition of the Colombian subsidiary in
April 1995 and the $.4 million fourth quarter restructure charge.
The increase in interest expense of $1.7 million was caused primarily
by higher effective interest rates in 1995 and by additional borrowings to
acquire the Colombian subsidiary.
<PAGE>
Income Taxes
- ------------
Income tax provisions for Worldtex have been calculated in accordance
with Statement of Financial Accounting Standards No. 109 ("SFAS 109"). Deferred
tax assets and liabilities are recognized for the future tax consequences
attributable to temporary differences between the carrying amounts of assets and
liabilities for tax purposes and financial statement purposes and operating loss
and tax credit carryforwards. Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable income in the years in
which those temporary differences are expected to be recovered or settled. The
effect on deferred tax assets and liabilities of a change in tax rates is
recognized in income in the period that includes the enactment date. The French
parliament enacted a provision that increased the tax rate from 33.33% to 36.67%
in July 1995. The rate increase resulted in a $.889 million charge to the 1995
tax provision to increase the deferred tax liability as of January 1, 1995, to
the higher enacted income tax rate.
Other Operating Information
- ---------------------------
Worldtex provides service to over 1,500 customers, and no single
customer accounted for more than 10% of consolidated net 1996 sales. Nearly all
of Worldtex's sales are attributable to the sale of covered elastic yarn. Any
significant decline in demand for covered elastic yarn would have a material
adverse effect on the operations of Worldtex. The Company regularly reviews
expansion opportunities, but has no plans to enter any markets other than the
manufacture of covered elastic yarns at the present time.
The Company believes that recent trends in consumer preferences have
put downward pressure on the sheer pantyhose market, and that alternative
apparel, such as trouser socks, knee highs and anklets, have gained favor.
Although the effect of these trends on the Company in 1996 cannot be quantified,
the Company believes that it has not been material. However, the Company cannot
predict the extent to which these trends may continue or their future effect on
the Company.
The Company has sought to broaden the range of applications for
covered yarn beyond pantyhose to a wide variety of apparel. In 1996, 21% of the
Company's European sales were for pantyhose, compared with 30% in 1995 and 28%
in 1994. In the Company's North American operations, 52% of sales were for
pantyhose in 1996, down from 63% in 1995 and 68% in 1994.
Approximately 69% of Worldtex's net sales in 1996 were attributable to
sales outside of the United States. Currency exchange fluctuations in countries
in which Worldtex is doing business could adversely affect its operating
results.
The Company engages in transactions primarily in the currencies of the
countries of its four major operating subsidiaries -- the U.S., France, Canada
and Colombia -- with little inter-company exchange. In 1996, over 83% of the
Company's sales were in such currencies. The majority of the remaining sales
were sales into the European Community by the Company's French subsidiary. Hedge
transactions are immaterial and are detailed in Note 3 of the Notes to
<PAGE>
Consolidated Financial Statements. Foreign currency transaction gains and losses
have not been material to the Company.
Spandex and nylon are the principal raw materials used in the
manufacture of covered elastic yarn by Worldtex. Worldtex purchases a
significant amount of its nylon and spandex from a single source, DuPont. In
recent years, DuPont and its competitors have expanded their spandex production
capacity, and Worldtex has been able to obtain sufficient supplies to meet its
customers' requirements. If the supply of spandex from DuPont should be
interrupted or cease for any reason, Worldtex believes it might be difficult to
find adequate alternative suppliers of spandex.
Liquidity; Capital Resources
- ----------------------------
The principal indicators of the Company's liquidity are cash flows
from operating activities and cash flows from financing activities, primarily
borrowings under the Company's credit facilities.
Worldtex generated $15 million from its operating activities in 1996,
compared to $12 million in 1995 and $9.6 million in 1994. The increase in net
cash provided in 1996 was caused primarily by the increase in net income.
During 1996, capital expenditures amounted to $13.8 million. Capital
expenditures were $8.4 million in 1995 and $8.1 million in 1994. During the
second quarter of 1995, a wholly owned subsidiary of the Company acquired
substantially all of the assets of Fibrexa, S.A., a manufacturer of covered yarn
based in Bogota, Colombia. The consideration for the purchase of Fibrexa was
approximately $4.4 million in cash, assumption of approximately $6.5 million in
debt and contingent payments based on earnings from the Company's South American
operations over a five year period. The majority of such capital expenditures
during the years 1994-1996 was primarily used to purchase additional
manufacturing equipment in order to increase and improve efficiencies to the
Company's production capacity. The Company anticipates that its 1997 capital
expenditures will approximate $14.5 million, primarily for the purchase of
equipment.
The Company is party to a Revolving Credit Loan Agreement, dated as of
November 12, 1992, as amended (the "Credit Agreement"), which provides for
borrowings by Worldtex through May 31, 1999 of up to $35 million, bearing
interest at rates based on LIBOR, the prime rate and certificate of deposit
rates. The Company is also party to Note Agreements, dated July 11, 1994 (the
"Note Agreement"), under which the Company issued $50 million of senior notes
due in 2004. The proceeds of this issue were used to extinguish $50 million of
debt under the Credit Agreement. These senior notes bear interest at 7.5% per
annum and are to be repaid in annual installments of $7.1 million beginning on
July 1, 1998. The Credit Agreement and the Note Agreement include various
covenants, including restrictions on liens and sales of assets and requirements
that certain financial ratios be satisfied. In addition, the Credit Agreement
provides that Worldtex may not pay dividends on or purchase its stock if the
aggregate amount of all such payments (after giving effect to any proposed
payment) since December 31, 1992, would exceed 35% of the aggregate net cash
proceeds received by Worldtex during such period from the sale of its stock plus
35% of Consolidated Net Income (as defined) for such period. The Note Agreement
<PAGE>
also prohibits such payments if the aggregate amount thereof (after giving
effect to any proposed payment) since June 30, 1994 would exceed the sum of $5
million, plus 75% of Consolidated Net Income (as defined) for such period plus
the aggregate net proceeds received by the Company from the sale of its stock
during such period.
The payment and level of cash dividends by Worldtex are subject to the
discretion of the Board of Directors of Worldtex. Dividend decisions are based
upon a number of factors, including the business condition, earnings and
financial condition of Worldtex, as well as compliance with the restrictions
contained in the Credit Agreement and the Note Agreement.
The Company has entered into an interest rate swap agreement with a
commercial bank that effectively converts the interest rate on one-half of its
$50 million 7.50% senior notes to a floating rate for three years ending July
1999. The agreement effectively changed the interest rate to approximately
6.24%, 7.87%, 7.08%, 6.59% and 6.77% for the six month intervals ended January
21, 1995 through January 21, 1997. The effective rate decreased to 6.52% for the
six months ending July 21, 1997 at which time the rate for the swap agreement
will reset for an additional six months based on market rates in effect at that
time. Net amounts due under this agreement decreased interest expense for 1996
by $.201 million, for 1995 by $.02 million and for 1994 by $.137 million.
Management believes the risk of incurring losses resulting from the inability of
the bank to fulfill its obligation under the swap agreement to be remote and
that any losses would be immaterial.
At December 31, 1996, the Company has indebtedness of $12.4 million
and $22.6 million was available for future borrowings under the Credit
Agreement. In addition, at such date Filix had $17.3 million, Rubyco $1.1
million and Fibrexa $2.8 million of U.S. dollar equivalent credit availability
under bank lines of credit. Amounts outstanding as of December 31, 1996 were
$1.3 million for Fibrexa, $.018 million for Rubyco and none outstanding for
Filix. The most restrictive covenant of the Credit Agreement and Note Agreement
limit short-term borrowings by the Company's subsidiaries to a total of $14
million. 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.
Three-Year Comparisons
- ----------------------
Total long-term debt was $67.8 million, $68.9 million and $61.1
million, respectively, at December 31, 1996, 1995 and 1994.
Working capital was $47.5 million, $47.3 million and $43 million,
respectively, at December 31, 1996, 1995 and 1994.
Net worth was $85.2 million, $78.9 million and $69 million,
respectively, at December 31, 1996, 1995 and 1994. (See the Consolidated
Statements of Stockholders' Equity of Worldtex for additional information.)
The number of days that sales were represented by accounts receivable
was 69, 68 and 61, respectively, at December 31, 1996, 1995 and 1994. Net
<PAGE>
accounts receivable increased by approximately $1.2 million, or 3.2%, in 1996
compared with 1995, and sales increased 10.6%. Inventories, as a percentage of
cost of sales, were 22.1% at December 31, 1996, 21.5% at December 31, 1995 and
21.3% at December 31, 1994.
Worldtex's results of operations and financial condition are based
upon historical cost. While it is difficult to accurately measure the impact of
inflation due to the imprecise nature of estimates required, Worldtex believes
the effects on the results of operations and financial condition have been
minor. Worldtex will continue to monitor the impact of inflation in setting its
pricing and other policies.
Item 8. Financial Statements and Supplementary Data
- ------- -------------------------------------------
The following financial statements, supplementary financial
information and schedules are filed as part of this Report:
WORLDTEX, INC.
Independent Auditors' Report
Financial Statements:
Consolidated Statements of Income,
Years Ended December 31, 1996, 1995 and 1994
Consolidated Balance Sheets,
December 31, 1996 and 1995
Consolidated Statements of Stockholders' Equity,
Years Ended December 31, 1996, 1995 and 1994
Consolidated Statements of Cash Flows,
Years Ended December 31, 1996, 1995 and 1994
Notes to Consolidated Financial Statements
Supplementary Financial Information
Financial Statement Schedule:
Schedule II - Valuation and Qualifying Accounts
Years Ended December 31, 1996, 1995
and 1994
All schedules not mentioned above are omitted for the reason that they
are not required or are not applicable, or the information is included in the
Consolidated Financial Statements or the Notes thereto.
<PAGE>
Independent Auditors' Report
- --------------------------------------------------------------------------------
The Board of Directors
Worldtex, Inc.:
We have audited the accompanying consolidated balance sheets of Worldtex, Inc.
and subsidiaries as of December 31, 1996 and 1995, and the related consolidated
statements of income, stockholders' equity and cash flows for each of the years
in the three-year period ended December 31, 1996. In connection with our audits
of the consolidated financial statements, we also have audited the financial
statement schedule as listed in Item 8 of this Form 10-K. These consolidated
financial statements and financial statement schedule are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
consolidated financial statements and financial statement schedule based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Worldtex, Inc. and
subsidiaries as of December 31, 1996 and 1995, and the results of their
operations and their cash flows for each of the years in the three-year period
ended December 31, 1996, in conformity with generally accepted accounting
principles. Also in our opinion, the related financial statement schedule, when
considered in relation to the basic consolidated financial statements taken as a
whole, presents fairly, in all material respects, the information set forth
therein.
KPMG Peat Marwick LLP
Greensboro, North Carolina
March 4, 1997
<PAGE>
WORLDTEX, INC.
Consolidated Statements of Income
================================================================================
For the years ended December 31, 1996, 1995 and 1994
(Dollars in thousands except per share amounts)
<TABLE>
<CAPTION>
1996 1995 1994
--------- ------- -------
<S> <C> <C> <C>
Net sales (Notes 12 and 16) $ 207,829 187,981 164,654
Cost of goods sold 168,754 156,519 138,666
--------- ------- -------
Gross profit 39,075 31,462 25,988
Selling and administrative expense 16,582 15,708 13,502
--------- ------- -------
Operating profit 22,493 15,754 12,486
Interest expense (5,693) (5,560) (3,885)
Other income - net 561 37 267
--------- ------- -------
Income before income taxes 17,361 10,231 8,868
Provision for income taxes (Note 11) 6,415 4,979 3,058
--------- ------- -------
Net income $ 10,946 5,252 5,810
========= ======= =======
Net income per share $ 0.75 0.36 0.40
========= ======= =======
Weighted average shares outstanding
(Notes 3 and 7) 14,669 14,567 14,639
========= ======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
WORLDTEX, INC.
Consolidated Balance Sheets
================================================================================
December 31, 1996 and 1995
(Dollars in thousands)
<TABLE>
<CAPTION>
ASSETS
1996 1995
--------- --------
<S> <C> <C> <C>
Current Assets:
Cash $ 2,117 1,845
Accounts and notes receivable, less allowance
for doubtful accounts of $2,589 in 1996 and
$2,623 in 1995 (Note 4) 39,868 38,619
Inventories (Note 3) 37,265 33,660
Prepaid expenses and other current assets (Note 11) 2,975 3,432
--------- --------
Total current assets 82,225 77,556
Property, plant and equipment - net (Note 3) 90,282 83,991
Other assets (Notes 3 and 15) 5,147 4,724
Cost in excess of net assets of acquired businesses, net
of accumulated amortization of $7,115 in 1996 and
$6,126 in 1995 28,378 29,794
--------- --------
$ 206,032 196,065
========= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term borrowings (Note 5) $ 1,342 939
Current installments of long-term debt (Note 6) 1,634 1,240
Accounts and notes payable-trade and other liabilities
(Notes 8 and 10) 30,254 24,990
Income taxes payable (Note 11) 1,525 3,045
--------- --------
Total current liabilities 34,755 30,214
Long-term debt (Note 6) 67,754 68,947
Other long-term liabilities 1,316 1,014
Deferred income taxes (Note 11) 17,029 16,951
--------- --------
Total liabilities 120,854 117,126
--------- --------
Stockholders' equity (Notes 6, 7 and 8):
Preferred stock 0 0
Common stock 147 147
Paid-in capital 29,946 29,913
Retained earnings 56,919 45,973
Cumulative foreign translation adjustment (336) 3,817
Less - Treasury stock, at cost (1,498) (911)
--------- --------
Total stockholders' equity 85,178 78,939
--------- --------
Commitments and contingencies (Note 9) $ 206,032 196,065
========= ========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
WORLDTEX, INC.
Consolidated Statements of Stockholders' Equity
================================================================================
For the years ended December 31, 1996, 1995 and 1994
(Dollars in thousands)
<TABLE>
<CAPTION>
Cumulative
Foreign
Common Paid-in Retained Translation Treasury
Stock Capital Earnings Adjustment Stock Total
----- ------- -------- ----------- -------- -------
<S> <C> <C> <C> <C> <C>
Balance at
Dec. 31, 1993 $147 29,913 34,911 (5,929) 0 59,042
Net income 0 0 5,810 0 0 5,810
Foreign currency translation adjustment 0 0 0 5,092 0 5,092
Purchases of treasury stock 0 0 0 0 (911) (911)
----- ------- -------- ----------- -------- -------
Balance at
Dec. 31, 1994 147 29,913 40,721 (837) (911) 69,033
Net income 0 0 5,252 0 0 5,252
Foreign currency translation adjustment 0 0 0 4,654 0 4,654
----- ------- -------- ----------- -------- -------
Balance at
Dec. 31, 1995 147 29,913 45,973 3,817 (911) 78,939
Net income 0 0 10,946 0 0 10,946
Foreign currency translation adjustment 0 0 0 (4,153) 0 (4,153)
Purchases of treasury stock 0 0 0 0 (587) (587)
Stock issued 0 33 0 0 0 33
----- ------- -------- ----------- -------- -------
Balance at
Dec. 31, 1996
(Notes 6, 7 and 8) $147 29,946 56,919 (336) (1,498) 85,178
===== ======= ======== =========== ======== =======
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
WORLDTEX, INC.
Consolidated Statements of Cash Flows
================================================================================
For the years ended December 31, 1996, 1995 and 1994
(Dollars in thousands)
<TABLE>
<CAPTION>
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 10,946 5,252 5,810
Adjustments to reconcile net
income to net cash provided
by operating activities:
Depreciation and amortization 6,284 6,133 4,889
Provision for losses on accounts receivable 139 1,332 658
Deferred income taxes 825 (161) 502
Change in assets and liabilities net of effects
of acquisition of Fibrexa:
Accounts and notes receivable (2,788) (2,751) (7,356)
Inventories (4,557) (1,276) (2,626)
Prepaid expenses and other current assets 163 (527) 517
Accounts and notes payable -
trade and other current liabilities 5,344 3,950 6,994
Income taxes payable (1,324) 94 204
--------- --------- ---------
Net cash provided by operating activities 15,032 12,046 9,592
--------- --------- ---------
Cash flows from investing activities:
Capital expenditures (13,785) (8,356) (8,077)
Acquisition of Fibrexa, S.A., net of cash acquired 0 (4,067) 0
Other investing activities (1,149) (3,011) (876)
--------- --------- ---------
Net cash used in investing activities (14,934) (15,434) (8,953)
--------- --------- ---------
Cash flows from financing activities:
Borrowings under line of credit arrangements 16,724 7,813 7,583
Payments under line of credit arrangements (16,321) (6,874) (7,699)
Borrowings under revolving credit facility 104,660 46,038 34,830
Payments under revolving credit facility (104,940) (40,578) (86,140)
Borrowings under long-term loans 0 0 50,000
Stock (reacquired) or issued, net (554) 0 (911)
Other financing activities 830 (4,217) 2,465
--------- --------- ---------
Net cash provided by financing activities 399 2,182 128
--------- --------- ---------
Effects of exchange rate changes on cash (225) (100) 175
--------- --------- ---------
Net increase (decrease) in cash 272 (1,306) 942
Cash at beginning of year 1,845 3,151 2,209
--------- --------- ---------
Cash at end of year $ 2,117 1,845 3,151
========= ========= =========
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest $ 5,784 5,265 2,278
========= ========= =========
Income taxes $ 7,630 3,722 1,464
========= ========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
WORLDTEX, INC.
Notes to Consolidated Financial Statements
================================================================================
(Dollars in thousands except for per share amounts)
Note 1 - Organization and Business
Worldtex, Inc. ("Worldtex" or the "Company"), a Delaware corporation
organized in July 1992, is a holding company engaged through its subsidiaries in
the manufacture of covered elastic yarn, which is used to manufacture hosiery
products and other apparel items. Worldtex's principal markets are in North
America, South America and Europe. Worldtex's operations are concentrated in one
segment: the manufacture of covered elastic yarns.
Worldtex's principal subsidiaries are Regal Manufacturing Company,
Inc. ("Regal"), based in Hickory, North Carolina, Rubyco (1987), Inc.
("Rubyco"), based in Montreal, Canada, Filix Lastex, S.A. ("Filix"), based in
Troyes, France, and Fibrexa, Ltda. ("Fibrexa"), based in Bogota, Colombia.
Reference to Worldtex shall include its subsidiaries unless the context shall
indicate otherwise.
Note 2 - Basis of Presentation
The consolidated financial statements of Worldtex as of December 31,
1996 and 1995 and for the years ended December 31, 1996, 1995 and 1994 include
the accounts of Regal, Rubyco, Filix and, since April 1, 1995, the accounts of
Fibrexa. All significant intercompany balances and transactions for all periods
are eliminated in the consolidated financial statements.
Note 3 - Summary of Significant Accounting Policies
(a) Cash
At December 31, 1996 and 1995, other assets include restricted cash on
deposit of $2,004 and $2,234, respectively, as security for loans to Fibrexa in
Colombia, South America.
(b) Inventories
Inventories are stated at the lower of cost (determined on a first-in,
first-out basis) or market.
As of December 31, 1996 and 1995, the major classes of inventory are:
<TABLE>
<CAPTION>
1996 1995
------- -------
<S> <C> <C>
Raw Materials $12,614 12,728
------- -------
Work in Process 6,428 5,429
-------
Finished Goods 18,223 15,503
------- -------
$37,265 33,660
======= =======
</TABLE>
(c) Property, Plant and Equipment
Property, plant and equipment are recorded at cost and depreciated
primarily using the straight-line method over the following estimated useful
lives of the related assets: machinery and equipment (10 to 20 years, with
<PAGE>
WORLDTEX, INC.
Notes to Consolidated Financial Statements
================================================================================
(Dollars in thousands except for per share amounts)
approximately 77% being depreciated over 20 years), structures (20 to 40 years),
other equipment (5 to 10 years). Leasehold improvements are amortized over their
respective lease terms or their estimated useful lives, if shorter. Repair and
maintenance costs are charged to expense as incurred. Renewals and betterments
which substantially extend the useful life of an asset are capitalized and
depreciated. As of December 31, 1996 and 1995, property, plant and equipment
consists of:
<TABLE>
<CAPTION>
1996 1995
-------- --------
<S> <C> <C>
Land $ 2,471 2,538
Buildings and leasehold
improvements 31,181 29,729
Machinery and equipment 91,008 84,598
-------- --------
124,660 116,865
Less accumulated
depreciation and
amortization 34,378 32,874
-------- --------
$ 90,282 83,991
======== ========
</TABLE>
(d) Cost in Excess of Net Assets of Acquired Businesses
The cost in excess of net assets of acquired businesses is amortized
on the straight-line method over the expected periods to be benefited, generally
40 years. The Company assesses the recoverability of this intangible asset by
determining whether the amortization of the cost in excess of net assets of
acquired businesses over its remaining life can be recovered through the
undiscounted future operating cash flows of the acquired business. The
assessment of the recoverability of goodwill will be impacted if estimated
future cash flows are not achieved.
(e) Forward Exchange Contracts
Rubyco enters into forward exchange contracts as a hedge against
accounts payable denominated in foreign currency. These contracts are used by
Rubyco to minimize exposure and reduce risk from exchange rate fluctuations in
the regular course of its foreign business. Gains and losses on forward
contracts, which are not material, are deferred and included in the measurement
of the related foreign currency transactions. The impact of forward contracts on
cash flows is reflected in the change in accounts and notes payable - trade. As
of December 31, 1996 and 1995, $500 and $100, respectively, in contracts were
outstanding.
(f) Income Taxes
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to temporary differences between the carrying amounts
of assets and liabilities for tax purposes and financial statement purposes and
operating loss and tax credit carryforwards. Deferred tax assets and liabilities
are measured using enacted tax rates expected to apply to taxable income in the
<PAGE>
WORLDTEX, INC.
Notes to Consolidated Financial Statements
================================================================================
(Dollars in thousands except for per share amounts)
years in which those temporary differences are expected to be recovered or
settled. The effect on deferred tax assets and liabilities of a change in tax
rates is recognized in income in the period that includes the enactment date.
No provision is made for income taxes which may be payable if
undistributed earnings of foreign subsidiaries were to be paid as dividends to
Worldtex, since Worldtex intends that such earnings will continue to be invested
in those countries. At December 31, 1996, the cumulative amount of foreign
undistributed earnings amounted to approximately $40,633. Foreign tax credits
may be available as a reduction of United States income taxes in the event of
such distributions.
(g) Foreign Exchange
Assets and liabilities denominated in foreign currencies have been
translated into U. S. dollars at the period-end exchange rate. Translation gains
and losses are accounted for in a separate component of stockholders' equity.
The exchange gains and losses arising on transactions are charged to income as
incurred. Revenues and expenses denominated in foreign currencies have been
translated into U.S. dollars at the weighted average exchange rate.
(h) Earnings per Share
Earnings per share are calculated based upon the weighted average
number of common shares outstanding and common equivalent shares during the
year.
(i) Revenue Recognition
Revenue from sales is recognized when goods are shipped to the
customer.
(j) Interest Rate Swap
The interest rate swap agreement is accounted for like a hedge of the
underlying debt obligation and interest expense is recorded using the revised
interest rate, with fees and other payments amortized as yield adjustments.
(k) Stock Options
Prior to January 1, 1996, the Company accounted for its stock option
plan in accordance with the provisions of Accounting Principles Board ("APB")
Opinion No. 25, Accounting for Stock Issued to Employees, and related
interpretations. As such, compensation expense would be recorded on the date of
grant only if the current market price of the underlying stock exceeded the
exercise price. On January 1, 1996, the Company adopted SFAS No. 123, Accounting
for Stock-Based Compensation, which allows entities to continue to apply the
provisions of APB Opinion No. 25 and provide pro forma net income and pro forma
earnings per share disclosures for employee stock option grants made in 1995 and
future years as if the fair-value-based method defined in SFAS No. 123 had been
applied. The Company has elected to continue to apply the provisions of APB
Opinion No. 25 and provide the pro forma disclosure provisions of SFAS No. 123.
(l) Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that effect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the period.
Actual results could differ from those estimates.
(m) Reclassifications
Certain prior year amounts have been reclassified to conform to the
current year presentation. The reclassifications did not impact net earnings as
previously reported.
Note 4 - Notes Receivables
Filix has the U.S. dollar equivalent of approximately $4,500 and
$5,252 of non-interest bearing notes receivable as of December 31, 1996 and
1995, respectively, with maturities within four months of the periods ended.
Note 5 - Short-Term Borrowings
Short-term debt consists of notes payable to banks and advances under
bank lines of credit and overdraft facilities.
Fibrexa has available the U.S. dollar equivalent of $2,800 under
various bank lines of credit providing for unsecured borrowings and letter of
credit financing generally due in 90 days. At December 31, 1996 and 1995, $1,324
and $939, respectively, were outstanding under these agreements at average
interest rates of 7.57% and 7.44% respectively.
Filix has available the U.S. dollar equivalent of $17,341 under
various bank lines of credit and overdraft facilities bearing interest at 4.21%.
At December 31, 1996 and 1995, no amounts were outstanding under these
facilities.
Rubyco has available the U.S. dollar equivalent of $1,095 under a bank
line of credit, due on demand, providing for unsecured borrowings and letter of
credit financing at the bank's prime rate (4.75% at December 31, 1996). The line
of credit is guaranteed by the Company. At December 31, 1996 and 1995, $18 and
$0, amounts respectively, were outstanding under this agreement.
<PAGE>
WORLDTEX, INC.
Notes to Consolidated Financial Statements
================================================================================
(Dollars in thousands except for per share amounts)
Note 6 - Long-term Debt
As of December 31, 1996 and 1995, long-term debt consists of:
<TABLE>
<CAPTION>
1996 1995
------- ------
<S> <C> <C>
7.50% Senior Notes due July 1,
1998 through July 1, 2004 $50,000 50,000
Revolving credit facilities with
interest at variable rates
(6.56% and 6.86% weighted
average rate as of December
31, 1996 and 1995) due
May 31, 1999 12,390 12,670
Other indebtedness, primarily
fixed rate debt, due at
various dates through 2007 6,998 7,517
------- ------
69,388 70,187
Less current installments 1,634 1,240
------- ------
$67,754 68,947
------- ------
</TABLE>
The aggregate annual maturities of long-term debt during each of the five years
subsequent to December 31, 1996 are as follows:
<TABLE>
<CAPTION>
Year ending
December 31 Amount
----------- --------
<S> <C>
1997 $ 1,634
1998 7,849
1999 20,068
2000 9,089
2001 7,889
Thereafter 22,859
--------
$69,388
========
</TABLE>
During 1994, the Company entered into Senior Note Agreements which
provide a total $50,000 ten year loan due July 1, 2004 with interest at the
annual rate of 7.5%. Annual principal payments of $7,100 are due beginning July
1, 1998. The agreements contain various covenants requiring the maintenance of
certain ratios and amounts pertaining to stockholders' equity, working capital
and net income. In addition, the agreements restrict future borrowings, capital
spending and the payment of dividends. At December 31, 1996, Worldtex was in
compliance with the various covenants.
The Company has an interest rate swap agreement with a commercial bank
that effectively converts a portion of its $50,000 Senior Notes from fixed rate
debt to a floating rate based on LIBOR for a period of three years ending July
1999. At December 31, 1996, the swap agreement had a notional principal amount
of $25,000. The floating rate is reset every six months during the term of the
<PAGE>
WORLDTEX, INC.
Notes to Consolidated Financial Statements
================================================================================
(Dollars in thousands except for per share amounts)
interest rate swap agreement with interest due January 21 and July 21. The
agreement effectively changed the interest rate on $25,000 from 7.5% to
approximately 6.24%, 7.87%, 7.08%, 6.59% and 6.77% for the six month intervals
ended January 21, 1995 through January 21, 1997 at which time the effective
interest rate for this portion of the debt was decreased to 6.52% for the next
six months. The estimated amount at which the Company could terminate this
agreement was approximately at a gain of $398 at December 31, 1996. Net amounts
due under this agreement decreased interest expense for 1996 by $201, for 1995
by $20 and for 1994 by $137. Management believes the risk of incurring losses
resulting from the inability of the bank to fulfill its obligation under the
swap agreement to be remote and that any losses would be immaterial.
The Company's revolving credit agreement provides a maximum of $35,000
in revolving credit, of which $12,390 was outstanding at December 31, 1996 and
$12,670 was outstanding at December 31, 1995. The agreement carries a commitment
fee of .25% of the unused revolving credit. The revolving credit facilities
terminate May 31, 1999 with an option to extend for two years at the Company's
discretion. The revolving credit agreement contains various covenants requiring
the maintenance of certain ratios and amounts pertaining to stockholders'
equity, working capital, debt to capitalization and fixed charge coverage. In
addition, the agreement restricts capital spending and the payment of dividends.
At December 31, 1996, Worldtex was in compliance with the various covenants.
Under the most restrictive of these debt agreements, $8,900 of
retained earnings was unrestricted as to the payment of dividends and other
distributions as of December 31,1996.
Note 7 - Stockholders' Equity
Worldtex is authorized to issue up to forty million shares of common
stock, $.01 par value and ten million shares of preferred stock, $.01 par value.
As of December 31, 1996 and 1995, there were issued and outstanding 14,403,271
and 14,475,571 shares of common stock, respectively, and no shares of preferred
stock. Worldtex is authorized to repurchase up to one million shares of its
common stock. In 1996, 78,500 shares were purchased and as a result 266,300
shares are carried at cost as Treasury Stock.
Preferred stock is issuable in one or more series with dividend rates,
liquidation preferences and redemption, conversion and voting rights as may be
determined by Worldtex's Board of Directors.
<PAGE>
WORLDTEX, INC.
Notes to Consolidated Financial Statements
================================================================================
(Dollars in thousands except for per share amounts)
In connection with Worldtex's formation, each shareholder received, in
addition to one share of Worldtex common stock, one share purchase right for
each outstanding share of the former parent's common stock. Each right entitles
the registered holder to purchase from Worldtex a unit ("Unit") consisting of
one one-hundredth of a share of preferred stock of Worldtex, at a price of $30
per Unit. The share purchase rights are not exercisable or transferable apart
from Worldtex common stock until the earlier to occur of 1) the tenth day
following a public announcement that a person or group of affiliated or
associated persons has acquired, or obtained the right to acquire, beneficial
ownership of 20% or more of the outstanding Worldtex common stock (an "Acquiring
Person"), or 2) the tenth business day following the commencement of a tender
offer or exchange offer if, upon consummation thereof, any person or group would
be an Acquiring Person. The share purchase rights will expire at the close of
business on December 31, 2002, unless earlier redeemed or exchanged by Worldtex.
Under the terms of the Worldtex 1992 Stock Incentive Plan, as amended
by the stockholders in May 1994, options to purchase up to 1,400,000 shares of
common stock may be awarded to officers and employees. Options granted under the
plan may be for such terms and exercised at such times as determined at the time
of grant by the Compensation Committee of the Board of Directors. In addition,
the Plan provides that each outside director will be granted an option to
purchase 10,000 shares of common stock of the Company. As of December 31, 1996,
78,000 shares were reserved for future awards under the plan. The 1992 Stock
Incentive Plan also includes provisions for the granting of stock appreciation
rights, restricted stock, deferred stock, employee loans and tax offset
payments. At December 31, 1996, no such grants had been issued, except for
limited stock appreciation rights applicable if there is a change of control (as
defined) of the Company.
The following table summarizes stock option activity during each of
the last three years:
<PAGE>
WORLDTEX, INC.
Notes to Consolidated Financial Statements
================================================================================
(Dollars in thousands except for per share amounts)
<TABLE>
<CAPTION>
Weighted
Average
Number of Exercise
shares Price
--------- --------
<S> <C> <C>
Balance at
December 31, 1993 578,000 $6.49
Options Granted 436,000 $4.19
Options Exercised 0 -
Options Canceled 18,000 $5.33
---------
Balance at
December 31, 1994 996,000 $5.50
Options Granted 86,000 $6.44
Options Exercised 0 -
Options Canceled 5,000 $6.44
---------
Balance at
December 31, 1995 1,077,000 $5.57
Options Granted 255,000 $4.82
Options Exercised 6,200 $5.43
Options Canceled 10,000 $4.19
---------
Balance at
December 31, 1996 1,315,800 $5.44
=========
Options Exercisable:
December 31, 1994 281,333 $6.39
December 31, 1995 507,200 $6.03
December 31, 1996 737,400 $5.91
Weighted average fair value of options granted:
December 31, 1995 $ 3.01
December 31, 1996 $ 2.27
</TABLE>
Options outstanding at December 31, 1996:
<TABLE>
<CAPTION>
Weighted
Average Weighted
Range of Remaining Average
Exercise Number of Contractual Exercise
Prices Shares Life Price
- ------------- --------- ----------- --------
<S> <C> <C> <C>
$4.19 - $4.75 657,800 8.0 yrs $ 4.40
$6.44 - $6.75 658,000 6.3 yrs $ 6.48
</TABLE>
Options exercisable at December 31, 1996:
<TABLE>
<CAPTION>
Weighted
Average Weighted
Range of Remaining Average
Exercise Number of Contractual Exercise
Prices Shares Life Price
- ------------- --------- ----------- --------
<S> <C> <C> <C>
$4.19 - $4.75 179,700 8.0 yrs $ 4.40
$6.44 - $6.75 557,700 6.3 yrs $ 6.48
</TABLE>
The Company applies Accounting Principles Board Opinion No. 25 and
accordingly recognizes compensation expense to the extent the quoted market
price of the stock exceeds the amount the employee is required to pay as of the
date of grant of the option. 200,000 options were issued at less than quoted
market value and $30 has been charged to compensation cost in 1996, 1995 and
<PAGE>
WORLDTEX, INC.
Notes to Consolidated Financial Statements
================================================================================
(Dollars in thousands except for per share amounts)
1994 respectively. These 200,000 options, plus 200,000 options issued at quoted
market value, vest ratably over three years while all other options vest ratably
over five years. The options have a ten year term.
Had compensation cost for the Company's stock option plan been
determined consistent with Financial Accounting Standards Statement No. 123,
"Accounting for Stock-Based Compensation", the Company's net income and net
income per share would be as follows:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Net income as reported $10,946 5,252
Pro forma $10,872 5,240
Net income per share as reported $.75 .36
Pro forma $.75 .36
</TABLE>
The fair value of each option grant is established on the date of the
grant using the Black-Scholes option-pricing model with the following
weighted-average assumptions used for grants in 1996 and 1995: dividend yield of
0%; expected volatility of 27% and 29%; risk-free interest rates of 5.5% and
expected lives of eight years.
Note 8 - Employee Benefit Plans
Employees of Regal participate in a non-contributory profit-sharing
plan for all eligible employees, including officers. The plan provides for
minimum employer contributions of the lesser of five percent of Regal's income
before taxes plus a discretionary amount determined by the Regal Board of
Directors or the maximum amount deductible for Federal income tax purposes.
Provisions for the years ended December 31, 1996, 1995 and 1994 were $60, $27
and $23 respectively.
Regal employees participate in the Worldtex Employee Stock Ownership
Plan ("Worldtex ESOP"). The Worldtex ESOP provides eligible employees with an
opportunity to purchase Worldtex common stock through payroll deductions, and
subject to certain limitations was matched by Worldtex. The Worldtex
contribution was suspended indefinitely effective June 1, 1996. Contributions to
the Worldtex ESOP are invested by an independent trustee in common stock of
Worldtex. Stock attributable to Worldtex contributions vests at the rate of 20%
for after two years of service, with 20% vesting added for each year, up to five
years of service, at which point an employee is 100% vested in the plan.
Contributions to the Worldtex ESOP were $50, $124 and $150 in 1996, 1995 and
1994 respectively. Effective June 1, 1996, the Worldtex ESOP was amended and
renamed The Worldtex, Inc. Profit Sharing and Retirement Savings Plan in order
to merge the Regal profit-sharing, the Worldtex ESOP, and the Worldtex, Inc.
401(k) plans. All vesting schedules for Company contributions were conformed to
the one described above for the ESOP plan.
Employees of Rubyco participate in a Registered Retirement Savings
plan. The plan provides for employee contributions of 4% of salary to a maximum
<PAGE>
WORLDTEX, INC.
Notes to Consolidated Financial Statements
================================================================================
(Dollars in thousands except for per share amounts)
of $2.6 per employee with corresponding contributions by Rubyco of 5% of salary
in 1996 and 1995 (and 4% in 1994), to a maximum of $2.6 per employee. Provisions
for the years ended December 31, 1996, 1995 and 1994 were $27, $27 and $25
respectively.
Filix is legally obligated to contribute to an employee profit-sharing
plan whereby annual contributions are determined on the basis of a prescribed
formula using capitalization, salaries and certain revenues. Amounts are paid
into a bank trust fund the year following the contribution calculation.
Provisions for the years ended December 31, 1996, 1995 and 1994 were $902, $780
and $580 respectively.
Under the terms of an industry-wide labor agreement, Filix employees
are entitled to a lump-sum payment at normal retirement age of up to four months
salary depending on their number of years of service. Such amounts are payable
only if the employee remains with Filix until retirement. The plan is not
funded. The following table sets forth the plan's unfunded status as of December
31, 1996 and 1995:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Actuarial present value of benefit obligations:
Vested benefit obligations $ - -
====== =====
Accumulated benefit obligation $ (256) (327)
====== =====
Projected benefit obligation $ (299) (384)
Plan assets at fair value - -
------ -----
Projected benefit obligation in
excess of plan assets (299) (384)
Unrecognized net loss 99 120
------ -----
Accrued pension liability $ (200) (264)
====== =====
</TABLE>
Net periodic pension cost of the Filix agreement for the years ended
December 31, 1996, 1995 and 1994 included the following components:
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Service cost $11 9 7
Interest cost on
projected 25 26 19
benefit obligation
Amortization of
(gain)/loss 11 0 0
Net periodic pension cost $47 35 26
</TABLE>
The projected benefit obligation at December 31, 1996 and 1995 was
determined using an assumed discount rate of 7.5% and 7% respectively. The
assumed long-term rate of increase in compensation was 3% for 1996 and 1995.
Worldtex has an unfunded supplemental death and retirement plan for
certain key employees. The accrued pension liability at December 31, 1996 and
1995 was $1,287 and $765 respectively. Net periodic pension cost was $522, $72
and $68 in 1996, 1995 and 1994 respectively.
<PAGE>
WORLDTEX, INC.
Notes to Consolidated Financial Statements
================================================================================
(Dollars in thousands except for per share amounts)
Note 9 - Commitments and Contingencies
Future minimum lease payments under noncancelable operating leases,
primarily for real property, as of December 31, 1996 are:
<TABLE>
<CAPTION>
<S> <C>
1997 $ 1,130
1998 1,138
1999 1,154
2000 1,246
2001 59
-------
Total $ 4,727
=======
</TABLE>
Rental expense for cancelable and noncancelable operating leases
charged to operations for the years ended December 31, 1996, 1995 and 1994 was
approximately $974, $647 and $427 respectively.
In the normal course of business, Worldtex and its subsidiaries may
sometimes be named as a defendant in litigation. In the opinion of management,
based upon the advice of counsel, any uninsured liability which may result from
the resolution of any present litigation or asserted claim will not have a
material effect on Worldtex's operations, financial position or liquidity.
Note 10 - Accounts and Notes Payable - Trade and Other Liabilities
Accounts and notes payable - trade and other liabilities consist of
the following as of December 31, 1996 and 1995:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Accounts and other payables - trade $21,229 16,206
Salaries, wages and other compensation 3,502 2,982
Pensions, profit sharing and employee benefits 1,530 1,445
Taxes, other than income taxes 831 457
Interest 2,109 2,110
Other 1,053 1,790
------- ------
Total $30,254 24,990
======= ======
</TABLE>
Note 11 - Income Taxes
The provisions for income taxes for the years ended December 31, 1996,
1995 and 1994 are as follows:
<PAGE>
WORLDTEX, INC.
Notes to Consolidated Financial Statements
================================================================================
(Dollars in thousands except for per share amounts)
<TABLE>
<CAPTION>
U.S. U.S. State
Federal Foreign & Local Total
------- ------- ---------- -----
<S> <C> <C> <C> <C>
1996
Current $ 90 5,711 22 5,823
Deferred (154) 758 (12) 592
------ ----- --- -----
Total $ (64) 6,469 10 6,415
====== ===== === =====
1995
Current $ 0 5,037 0 5,037
Deferred (717) 834 (175) (58)
------ ----- --- -----
Total $ (717) 5,871 (175) 4,979
====== ===== === =====
1994
Current $ (424) 3,093 (103) 2,566
------ ----- --- -----
Deferred 195 245 52 492
------ ----- --- -----
Total $ (229) 3,338 (51) 3,058
====== ===== === =====
</TABLE>
Income before income taxes for the years ended December 31, 1996, 1995
and 1994 is comprised as follows:
<TABLE>
<CAPTION>
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
U.S. $ (365) (1,959) (813)
Foreign 17,726 12,190 9,681
-------- ------ -----
$ 17,361 10,231 8,868
======== ====== =====
</TABLE>
A reconciliation for the years ended December 31, 1996, 1995 and 1994
between the amount computed using the U.S. Federal income tax rate and the
effective rate of tax on book income is as follows:
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Statutory U.S. Federal
income tax rate 34.0% 34.0% 34.0%
State and local income
taxes, net of U.S.
Federal income tax benefit - (1.1) (0.5)
Effect of increase in French
tax rate on deferred taxes - 8.7 -
Amortization of goodwill 1.9 3.0 3.2
Other, net 1.1 4.1 (2.2)
---- ---- ----
Effective rate of tax on
book income 37.0% 48.7% 34.5%
==== ==== ====
</TABLE>
In July 1995, the French parliament enacted a provision that increased
the tax rate from 33.33% to 36.67%. The rate increase resulted in a $889 charge
to the 1995 income tax provision to increase the deferred tax liability as of
January 1, 1995, to the higher enacted income tax rate.
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and liabilities at December 31, 1996 and
1995 are as follows:
<PAGE>
WORLDTEX, INC.
Notes to Consolidated Financial Statements
================================================================================
(Dollars in thousands except for per share amounts)
<TABLE>
<CAPTION>
1996 1995
-------- -------
<S> <C> <C>
Deferred tax assets:
Inventories $ 196 199
Employee benefits 739 551
Other nondeductible reserves 1,136 1,635
-------- -------
2,071 2,385
-------- -------
Deferred tax liabilities:
Property, plant and equipment (16,813) (16,792)
Imputed interest (838) (868)
-------- -------
(17,651) (17,660)
-------- -------
Net deferred income taxes $(15,580) (15,275)
======== =======
</TABLE>
Deferred taxes are classified in the accompanying Consolidated Balance
Sheet captions as follows:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Prepaid expenses and current assets $ 1,449 1,676
Deferred income taxes (17,029) (16,951)
-------- -------
$(15,580) (15,275)
======== =======
</TABLE>
There was no valuation allowance for deferred tax assets as of
December 31, 1996 and there was no change in this valuation allowance during the
years ended December 31, 1996 and 1995. Based upon the level of historical
taxable income and the expected reversal of future taxable temporary
differences, management believes it is more likely than not that the Company
will realize the benefits of these deductible differences at December 31, 1996.
Note 12 - Geographic Information
Financial information by geographic area for the years ended December
31, 1996, 1995 and 1994 is summarized as follows:
<TABLE>
<CAPTION>
North South
America Europe America Total
------- ------ ------- -----
<S> <C> <C> <C> <C>
1996
Net Sales $ 86,280 109,785 11,764 207,829
Operating Profit 2,469 19,049 975 22,493
Identifiable Assets 79,598 101,452 24,982 206,032
1995
Net Sales 80,721 100,577 6,683 187,981
Operating Profit (loss) (311) 14,878 1,187 15,754
Identifiable Assets 80,514 99,439 16,112 196,065
1994
Net Sales 88,241 76,413 - 164,654
Operating Profit 1,280 11,206 - 12,486
Identifiable Assets $ 80,480 85,925 - 166,405
</TABLE>
<PAGE>
WORLDTEX, INC.
Notes to Consolidated Financial Statements
================================================================================
(Dollars in thousands except for per share amounts)
Note 13 - Fair Value of Financial Instruments
Statement of Financial Accounting Standards No. 107, Disclosures About
Fair Value of Financial Instruments, requires all entities to disclose the fair
value of certain on- and off-balance sheet financial instruments in their
financial statements.
(a) Cash, Accounts and Notes Receivable and Accounts and Notes Payable
The carrying amount approximates fair value because of the short
maturity of these instruments.
(b) Long-Term Debt
The fair values of each of the Company's long-term debt instruments
are based on the amount of future cash flows associated with each instrument
discounted using the Company's current borrowing rate for similar debt
instruments of comparable maturity. The estimated fair values of the Company's
long-term debt instruments are:
<TABLE>
<CAPTION>
December 31, 1996
--------------------------
Carrying Estimated
Amount Fair Value
-------- ----------
<S> <C> <C>
7.50% Senior Notes $50,000 52,509
Revolving credit facilities 12,390 12,365
Other indebtedness 6,998 7,070
------- ------
Total $69,388 71,944
======= ======
</TABLE>
(c) Forward Exchange Contracts
The forward exchange contracts described in Note 3(e) are relatively
simple, short-term instruments in which future exchange rates are locked in for
a fee.
(d) Interest Rate Swap
The interest rate swap described in Note 3(j) is discussed further in
Note 6.
(e) Limitations
Fair value estimates are made at a specific point in time, based on
relevant market information and information about the financial instrument.
These estimates are subjective in nature and involve uncertainties and matters
of significant judgment and therefore cannot be determined with precision.
Changes in assumptions could significantly affect the estimates.
Note 14 - Acquisitions
During the second quarter of 1995, a wholly owned subsidiary of the
Company acquired substantially all of the assets of Fibrexa, a manufacturer of
covered yarn based in Bogota, Colombia. The consideration for the purchase was
approximately $4,400 in cash, assumption of approximately $6,500 in debt and
contingent payments based on earnings from the Company's South American
operations over a five-year period. The funds for this purchase were obtained
<PAGE>
WORLDTEX, INC.
Notes to Consolidated Financial Statements
================================================================================
(Dollars in thousands except for per share amounts)
from the Company's cash on hand and borrowings under the Company's Revolving
Credit Agreement. The excess of cost over fair value of the net assets acquired
was approximately $800 at acquisition and $1,500 at year end 1995, and $2,000 at
December 1996 due to contingency payments per the purchase agreement and will be
amortized on a straight-line method over 40 years. The acquisition was accounted
for as a purchase and accordingly, the net assets and operations of Fibrexa have
been included in the Company's consolidated financial statements beginning on
the effective acquisition date of April 1, 1995.
Note 15 - Related Party Transactions
In 1996 and 1995, other assets include a $600 noninterest bearing note
receivable due in the year 2000 from a senior executive.
Note 16 - Concentrations
The company currently buys a significant portion of its Lycra and
spandex yarn, an important component of its products, from a single supplier.
There are a limited number of manufacturers of this raw material and a change in
suppliers could cause a delay in manufacturing and a possible loss of sales,
which would adversely affect operating results.
Worldtex served over 1,500 customers in 1996. In 1995, one customer
accounted for 10.5% of consolidated net sales. In 1996 and 1994, no customer
represented over 10% of consolidated net sales. Trade accounts receivable to
South American customers as of December 31, 1996 are approximately $4,245 of
which $2,544 are collateralized by letters of credit, insurance or other
security. The majority of Worldtex's sales are attributable to the sale of
covered elastic yarn. Any significant decline in demand for covered elastic yarn
would have a material adverse effect on the operations of Worldtex.
Note 17 - Restructuring Charge
In December 1995, the Company recorded a year-end charge of $1,715 (or
eight cents per share, net of taxes) for the closure of a Canadian manufacturing
facility and the Company's Buenos Aires, Argentina distribution branch. The
charge included accruals for severance, inventory adjustments, accounts
receivable reserves, and equipment and building write downs to estimated fair
market values. $1,300 was reflected as cost of goods sold and $400 as selling
and administrative expenses.
As of December 31, 1996, $1,315 is reserved primarily for the
disposition of a manufacturing facility, inventory valuation, and allowances for
the collectibility of accounts receivables related to the closed operations.
<PAGE>
WORLDTEX, INC.
Supplementary Financial Information
- --------------------------------------------------------------------------------
Years ended December 31, 1996, 1995 and 1994
(Dollars in thousands except per share amounts)
<TABLE>
<CAPTION>
Unaudited Quarterly Net Gross Net Net Earnings Per
Financial Data Sales Profit Income Share (A)
- ------------------- -------- ------ ------ ----------------
<S> <C> <C> <C> <C> <C>
1996 Quarter:
First $ 51,899 9,746 2,700 .19
Second 53,140 10,279 3,226 .22
Third 50,150 8,965 2,481 .17
Fourth 52,640 10,085 2,539 .17
-------- ------ ------
$207,829 39,075 10,946
======== ====== ======
1995 Quarter:
First $ 46,395 8,269 2,138 .15
Second 49,100 8,605 2,360 .16
Third 47,314 7,818 395 .03
Fourth 45,172 6,770 359 .02
-------- ------ ------
$187,981 31,462 5,252
======== ====== ======
1994 Quarter:
First $ 36,426 5,386 1,115 .08
Second 42,887 7,011 1,842 .13
Third 41,626 6,158 1,387 .10
Fourth 43,715 7,433 1,466 .10
-------- ------ ------
$164,654 25,988 5,810
======== ====== ======
</TABLE>
(A) Earnings per share are calculated based upon the weighted average number of
common shares outstanding and common equivalent shares during the year.
<PAGE>
WORLDTEX, INC.
Schedule II - Valuation and Qualifying Accounts
- --------------------------------------------------------------------------------
Years ended December 31, 1996, 1995 and 1994
(Dollars in thousands)
<TABLE>
<CAPTION>
Additions
-----------------------
Balance at Charged to Deductions Balance at
Beginning Cost and from End of
of Period Expenses Other Reserves Period
---------- ---------- ------ ---------- ----------
<S> <C> <C> <C> <C> <C>
1996
- ----
Allowance for doubtful accounts $2,623 139 - 173(A) 2,589
1995
- ----
Allowance for doubtful accounts $1,160 1,332 382(B) 251(A) 2,623
1994
- ----
Allowance for doubtful accounts $ 472 995 - 307(A) 1,160
</TABLE>
Notes:
(A) Accounts charged off, recoveries, and other adjustments, net.
(B) Increases to reserves reflecting subsidiary purchase price allocation
<PAGE>
Item 9. Changes In and Disagreements With Accountants on Accounting and
Financial Disclosure
----------------------------------------------------------------------
Not applicable.
PART III
Item 10. Directors and Executive Officers of the Registrant
- -------- --------------------------------------------------
Item 11. Executive Compensation
- -------- ----------------------
Item 12. Security Ownership of Certain Beneficial Owners and Management
- -------- --------------------------------------------------------------
Item 13. Certain Relationships and Related Transactions
- -------- ----------------------------------------------
Reference is made to the information responsive to the Items
comprising this Part III that is contained in Worldtex's definitive proxy
statement for its 1997 Annual Meeting of Stockholders to be filed pursuant to
Regulation 14A under the Securities Exchange Act of 1934, which is incorporated
herein by reference.
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
- -------- ---------------------------------------------------------------
Financial Statements and Schedules
- ----------------------------------
The financial statements and financial statement schedules included in
this Report are listed in the introductory portion of Item 8.
Exhibits
- --------
The following exhibits are filed as part of this Report (for
convenience of reference, exhibits are listed according to numbers assigned in
the exhibit tables of Item 601 of Regulation S-K under the Securities Exchange
Act of 1934 and management contracts or compensatory plans are indicated by an
asterisk):
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<S> <C>
2.1 Purchase Agreement, dated as of March 28, 1995, among
Fibrexa, S.A., the stockholders of Fibrexa, Worldtex
Colombiana, Ltda. and Worldtex -- filed as Exhibit 2 to the
Company's report on Form 8-K dated June 5, 1995 and
incorporated herein by reference.
3.1 Certificate of Incorporation of Worldtex -- filed as Exhibit
3.1 to Worldtex's Registration Statement on Form 10, dated
October 1, 1992, as amended, and incorporated herein by
reference.
3.2 By-Laws of Worldtex -- filed as Exhibit 3.2 to Worldtex's
Registration Statement on Form 10, dated October 1, 1992, as
amended, and incorporated herein by reference.
4.1 Share Purchase Rights Agreement, dated as of August 1, 1992,
by and between Worldtex and Chemical Bank as Rights Agent --
filed as Exhibit 4.1 to the Company's Annual Report on Form
10-K for 1992 and incorporated herein by reference.
4.2 Note Purchase Agreement, dated July 11, 1994, providing for
the issuance of $50,000,000 7.50% Senior Notes due 2004 --
filed as Exhibit 4.2 to the Company's = Annual Report on
Form 10-K for 1994 and incorporated herein by reference.
4.3 Amendment No. 1, dated as of January 30, 1995, to the Note
Agreement, dated July 11, 1994 -- filed as Exhibit 4.3 to
the Company's Annual Report on Form 10-K for 1994 and
incorporated herein by reference.
10.1 Distribution Agreement dated as of November 12, 1992,
between W&G and Worldtex -- filed as Exhibit 10.1 to the
Company's Annual Report on Form 10-K for 1992 and
incorporated herein by reference.
10.2 Tax Sharing Agreement dated as of November 12, 1992, between
W&G and Worldtex -- filed as Exhibit 10.2 to the Company's
Annual Report on Form 10-K for 1992 and incorporated herein
by reference.
10.3 Employment Agreement, dated November 15, 1993, between
Worldtex and Richard J. Mackey -- filed as Exhibit 10.3 to
the Company's Annual Report on Form 10-K for 1993 and
incorporated herein by reference.*
10.4 Employment Agreement, dated November 15, 1993, between
Worldtex and Barry D. Setzer -- filed as Exhibit 10.4 to the
Company's Annual Report on Form 10-K for 1993 and
incorporated herein by reference.*
10.5 1992 Stock Incentive Plan of Worldtex, as amended -- filed
as Appendix A to Worldtex's proxy statement, dated April 1,
1994, for the 1994 Annual Meeting of Stockholders, and
incorporated herein by reference*.
10.7 Amendment No. 1 to the Credit Agreement -- filed as Exhibit
10.7 to the Company's Annual Report on Form 10-K for 1993
and incorporated herein by reference.
10.8 Amendment No. 2 to the Credit Agreement -- filed as Exhibit
10.8 to the Company's Annual Report on Form 10-K for 1993
and incorporated herein by reference.
10.9 Amendment No. 3 to the Credit Agreement -- filed as Exhibit
10.9 to the Company's Annual Report on Form 10-K for 1994
and incorporated herein by reference.
10.10 Amendment No. 4 to the Credit Agreement -- filed herewith.
10.11 Amendment No. 5 to the Credit Agreement -- filed herewith.
11.1 Statement re computation of earnings per share -- filed
herewith.
21.1 Subsidiaries of Worldtex -- filed herewith.
23.1 Consent of KPMG Peat Marwick LLP -- filed herewith.
24.1 Powers of Attorney executed by certain directors and
officers of Worldtex -- filed as Exhibit 25.1 to the
Company's Annual Report on Form 10-K for 1992 and
incorporated herein by reference.
24.2 Powers of Attorney executed by Mitchell R. Setzer -- filed
as Exhibit 24.2 to the Company's Annual Report on Form 10-K
for 1994 and incorporated herein by reference.
24.3 Powers of Attorney executed by Claude D. Egler -- filed as
Exhibit 24.3 to the Company's Annual Report on Form 10-K for
1996 and incorporated herein by reference.
27.1 Financial Data Schedule (filed with EDGAR only)
</TABLE>
8-K Reports
- -----------
During the last quarter of the Company's 1996 fiscal year, the Company
filed no reports on Form 8-K.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
Dated: March 28, 1997
WORLDTEX, INC.
By /s/Richard J. Mackey
---------------------------------------
Richard J. Mackey
Chairman of the Board and
Chief Financial Officer
<PAGE>
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below on March 28, 1997 by the following persons on
behalf of the registrant and in the capacities indicated.
/s/Richard J. Mackey
- -----------------------------------------------------
Richard J. Mackey, Chairman of the Board,
Chief Financial Officer, Director and
Attorney for the persons indicated by asterisk
BARRY D. SETZER*
Barry D. Setzer, Director, President
and Chief Executive Officer
MITCHELL R. SETZER*
Mitchell R. Setzer, Secretary/Treasurer
and Principal Accounting Officer
SIDNEY B. BECKER*
Sidney B. Becker, Director
CLAUDE D. EGLER*
Claude D. Egler, Director
JOHN B. FRASER*
John B. Fraser, Director
- -----------------------------------------------------
Salim M. Ibrahim, Director
AUSTIN LIST*
Austin List, Director
WILLI ROELLI*
Willi Roelli, Director
JOHN K. ZIEGLER*
John K. Ziegler, Director
MICHAEL B. WILSON*
Michael B. Wilson, Director
EXHIBIT 10.10
AMENDMENT NO. 4 TO
REVOLVING CREDIT AGREEMENT
This is Amendment No. 4 dated as of June 13, 1996 (the "Fourth
Amendment") to the Revolving Credit Agreement dated as of November 12, 1992 (the
"Original Agreement") by and among Worldtex, Inc. (as successor to Willcox &
Gibbs, Inc.) (the "Borrower"), the Banks party thereto, and NationsBank, N.A.
(successor to NationsBank of North Carolina, N.A.) ("NationsBank") in its
capacity both as the Agent for the Banks ("Agent") and as a Bank, as previously
amended by Amendment No. 1, Amendment No. 2 and Amendment No. 3 to Revolving
Credit Agreement dated, respectively, as of January 15, 1993 (the "First
Amendment"), September 30, 1993 (the "Second Amendment") and July 15, 1994 (the
"Third Amendment"). The Original Agreement, as amended by the First Amendment,
the Second Amendment and the Third Amendment, is hereinafter collectively
referred to as the "Agreement".
Unless otherwise defined in this Fourth Amendment, terms defined in
the Agreement shall have the same definition when used in this Fourth Amendment.
A. _______In accordance with Section 8.01 of the Agreement, the
Borrower, the Banks and the Agent hereby agree to amend the Agreement as
follows:
1. "Termination Date" means, with respect to the Extensions of
Credit, the earliest to occur of (a) October 6, 1997, or (b) the date
of the termination in whole of the Commitments pursuant to Sections
2.03 or 6.01.
B. _______Fees and Expenses. All reasonable out-of-pocket expenses
(including the reasonable fees and expenses of Moore & Van Allen, special
counsel to NationsBank) incurred by any Bank in connection with the execution,
delivery and enforcement of this Fourth Amendment shall be paid by the Borrower.
C. _______Miscellaneous. This Fourth Amendment may be executed in any
number of counterparts and by different parties hereto in separate counterparts,
each of which when taken together shall constitute one and the same agreement.
Except as specifically amended hereby, the Agreement shall continue in full
force and effect in accordance with its terms, and the Agreement, as amended
hereby, is ratified and confirmed in all respects by the undersigned. This
Fourth Amendment shall be governed by and construed in accordance with the laws
of the State of New York.
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Fourth Amendment to be
executed by their respective officers thereunto duly authorized, as of the date
first written above.
WORLDTEX, INC.
By:
-----------------------------------------
Title:
-----------------------------------------
NATIONSBANK, N.A., as a Bank and as Agent
By:
-----------------------------------------
Title:
-----------------------------------------
BANK OF AMERICA
By:
-----------------------------------------
Title:
-----------------------------------------
FLEET BANK, N.A.
By:
-----------------------------------------
Title:
-----------------------------------------
EXHIBIT 10.11
AMENDMENT NO. 5 TO
REVOLVING CREDIT AGREEMENT
THIS AMENDMENT NO. 5 TO REVOLVING CREDIT AGREEMENT dated as of January
14, 1997 (the "Fifth Amendment") amends that certain Revolving Credit Agreement
dated as of November 12, 1992 (the "Original Agreement") by and among Worldtex,
Inc. (as successor to Willcox & Gibbs, Inc.) (the "Borrower"), the Banks party
thereto, and NationsBank, N.A. (as successor to NationsBank of North Carolina,
N.A.) ("NationsBank") in its capacity both as the Agent for the Banks (in such
capacity, the "Agent") and as a Bank, as previously amended by Amendment No. 1
to Revolving Credit and Term Loan Agreement dated as of January 15, 1993 (the
"First Amendment"); Amendment No. 2 to Revolving Credit and Term Loan Agreement
dated as of September 30, 1993 (the "Second Amendment"); Amendment No. 3 to
Revolving Credit and Term Loan Agreement dated as of July 15, 1994 (the "Third
Amendment") and Amendment No. 4 to Revolving Credit Agreement dated as of June
13, 1996 (the "Fourth Amendment"). The Original Agreement, as amended by the
First Amendment, the Second Amendment, the Third Amendment and the Fourth
Amendment, is hereinafter collectively referred to as the "Agreement".
Unless otherwise defined in this Fifth Amendment, terms used but not
otherwise defined herein shall have the meaning set forth in the Agreement. In
accordance with Section 8.01 of the Agreement, the Borrower, the Banks and the
Agent hereby agree to amend the Agreement as follows:
1. Section 1.1 of the Agreement is hereby amended to by deleting
the definitions set forth below and restating them as follows:
"Required Banks" means as of any date, a Bank or Banks on
such date having Credit Exposures (as defined below) aggregating
at least 57%, if there are then at least three Banks, or 75%, if
there are then fewer than three Banks, of the aggregate Credit
Exposures of all the Banks. For purposes of the preceding
sentence, the amount of the "Credit Exposure" of each Bank as of
any date shall be equal to the aggregate principal amount of the
Advances plus the aggregate unutilized amounts of such Bank's
Commitment as of such date plus the amount of such Bank's share
of the aggregate undrawn stated amount of outstanding Letters of
Credit and of the reimbursement obligations thereunder as of such
date plus such Bank's share of outstanding drafts created as
Banker's Acceptances by NationsBank as of such date; provided
that, if any Bank shall have failed to pay to NationsBank its
share of any drawing under any Letter of Credit or under any
Advance made with respect to Banker's Acceptances as provided in
Subsection 2.01(c)(vi) such Bank's Credit Exposure attributable
to such Letter of Credit and Banker's Acceptance shall be deemed
to be held by NationsBank for purposes of this definition
<PAGE>
"Termination Date" means, with respect to the Extensions of
Credit, the earliest to occur of (a) May 31, 1999, or (b) the
date of the termination in whole of the Commitments pursuant to
Sections 2.03 or 6.01.
2. Section 5.02(h) of the Agreement is hereby amended by adding
the following as clause (xv) and renumbering existing clause (xv) to
become (xvi):
", (xv) loans, advances, indebtedness or other contributions
associated with joint ventures in India and China in an aggregate
amount not to exceed at any time $5,000,000, and"
3. Section 5.02(q) of the Agreement is hereby deleted in its
entirety and replaced with the following:
"(q) Consolidated Adjusted Net Worth. Permit Consolidated
Adjusted Net Worth to be less than the sum of (i) $70,000,000
plus (ii) 50% of Consolidated Net Income for each fiscal quarter
ending after December 31, 1993; provided, however, it is
understood and agreed that Consolidated Net Income will be deemed
to be $0 for purposes of this calculation for any fiscal quarter
in which Consolidated Net Income of the Borrower is a negative
number."
4. Section 5.02(r) of the Agreement is hereby deleted in its
entirety and replaced with the following:
"(r) Consolidated Capital Expenditures. Permit Consolidated
Capital Expenditures made during any fiscal year to exceed
$16,000,000."
5. Fees and Expenses. The Borrower shall pay all reasonable legal
fees and out-of-pocket expenses (including, without limitation, the
reasonable legal fees and expenses of Moore & Van Allen, PLLC, special
counsel to NationsBank) incurred by each Bank in connection with the
execution, delivery and enforcement of this Fifth Amendment.
6. Miscellaneous.
--------------
(a) This Fifth Amendment may be executed in any number of
counterparts and by different parties hereto in separate
counterparts, each of which when taken together shall constitute
one and the same agreement.
(b) Except as specifically amended hereby, the Agreement
shall continue in full force and effect in accordance with its
terms, and the Agreement, as amended hereby, is ratified and
confirmed in all respects by the undersigned.
(c) This Fifth Amendment shall be governed by and construed
in accordance with the laws of the State of New York.
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Fifth Amendment to be
executed by their respective officers thereunto duly authorized as of the date
first written above.
WORLDTEX, INC.
By:
-----------------------------------------
Name:
-----------------------------------------
Title:
-----------------------------------------
COMMITTED AMOUNT: NATIONSBANK, N.A., as a Bank and as Agent
- -----------------
$15,000,000 By:
-----------------------------------------
Name:
-----------------------------------------
Title:
-----------------------------------------
BANK OF AMERICA ILLINOIS
$15,000,000 By:
-----------------------------------------
Name:
-----------------------------------------
Title:
-----------------------------------------
BANQUE NATIONALE DE PARIS,
HOUSTON AGENCY
$5,000,000 By:
-----------------------------------------
Name:
-----------------------------------------
Title:
-----------------------------------------
Exhibit 11.1
WORLDTEX, INC.
COMPUTATION OF EARNINGS PER SHARE
- --------------------------------------------------------------------------------
(Dollars in thousands except per share amounts)
<TABLE>
<CAPTION>
Years Ended December 31
---------------------------------------
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
Net income $ 10,946 5,252 5,810
=========== =========== ===========
Shares:
Weighted average number of shares
outstanding 14,463,173 14,475,571 14,583,147
Assumed exercise of options 205,884 90,995 56,190
----------- ----------- -----------
Total average number of common and
common equivalent shares used
for primary computation 14,669,057 14,566,566 14,639,337
=========== =========== ===========
Primary earnings per share (1) $ .75 .36 .40
=========== =========== ===========
Shares:
Weighted average number of shares
outstanding 14,463,173 14,475,571 14,583,147
=========== =========== ===========
Assumed exercise of options 506,671 115,576 -
----------- ----------- -----------
Total average number of common and
common equivalent shares used
for fully diluted computation 14,969,844 14,591,147 14,583,147
=========== =========== ===========
Fully diluted earnings per share(2) $ .73 .36 .40
=========== =========== ===========
<FN>
- ----------
(1) Earnings per share are calculated based upon the weighted average number of
common shares outstanding and common equivalent shares during the year.
(2) Fully diluted earnings per share calculations result in less than 3%
reduction and are accordingly not considered as dilution in the financial
statements.
</FN>
</TABLE>
Exhibit 21.1
WORLDTEX, INC.
Subsidiaries
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
State or Other
Name of Subsidiary Jurisdiction of Incorporation
- ------------------ -----------------------------
<S> <C>
Filix Lastex S.A. France
Galaurtex Sarl, S.A. France
Moulinage de la Galaure France
Worldtex France, S.A. France
Willcox & Gibbs Filix of Delaware Delaware
Rubyco (1987), Inc. Quebec
Regal Yarns of Argentina North Carolina
Regal Manufacturing Company, Inc. Delaware
Fibrexa Ltda Colombia
Worldtex Colombiana I Delaware
Worldtex Colombiana II Delaware
</TABLE>
Exhibit 23.1
Consent of Independent Auditors
The Board of Directors
Worldtex, Inc.:
We consent to the incorporation by reference in the Registration
Statements on Form S-8 of Worldtex, Inc. filed November 30, 1992 (No. 33-55124)
and filed December 8, 1993 (No. 33-72640) of our audit report dated March 4,
1997, relating to the consolidated balance sheets of Worldtex, Inc. and
subsidiaries as of December 31, 1996 and 1995, and the related consolidated
statements of income, stockholders' equity and cash flows and related schedule
for the three years then ended, which report appears in the December 31, 1996
Annual Report on Form 10-K of Worldtex, Inc.
KPMG PEAT MARWICK LLP
Greensboro, North Carolina
March 28, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM WORLDTEX,
INC. FORM 10-K FOR THE PERIOD ENDED DECEMBER 31, 1996 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<EXCHANGE-RATE> 1
<CASH> 2,117
<SECURITIES> 0
<RECEIVABLES> 39,868
<ALLOWANCES> 2,589
<INVENTORY> 37,265
<CURRENT-ASSETS> 82,225
<PP&E> 124,660
<DEPRECIATION> 34,378
<TOTAL-ASSETS> 206,032
<CURRENT-LIABILITIES> 34,755
<BONDS> 67,754
0
0
<COMMON> 147
<OTHER-SE> 85,031
<TOTAL-LIABILITY-AND-EQUITY> 206,032
<SALES> 207,829
<TOTAL-REVENUES> 207,829
<CGS> 168,754
<TOTAL-COSTS> 168,754
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 139
<INTEREST-EXPENSE> 5,693
<INCOME-PRETAX> 17,361
<INCOME-TAX> 6,415
<INCOME-CONTINUING> 10,946
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 10,946
<EPS-PRIMARY> .75
<EPS-DILUTED> .73
</TABLE>
