SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1997
Commission file number 1-11438
WORLDTEX, INC.
(Exact name of registrant as specified in its charter)
Delaware 56-1789271
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
212 12th Avenue, N.E., Hickory, North Carolina 28601
(Address of principal executive offices) (Zip Code)
(704) 328-5381
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date:
Date Class Shares Outstanding
------------- ------------ ------------------
June 30, 1997 Common Stock 14,428,671
<PAGE>
WORLDTEX, INC.
INDEX
-----
PAGE NUMBER
-----------
PART I - Financial Information
Consolidated Balance Sheets at June 30, 1997 1-2
(Unaudited) and December 31, 1996
Consolidated Statements of Income (Unaudited) 3
for the Six Months and Three Months Ended
June 30, 1997 and 1996
Consolidated Statements of Cash Flows (Unaudited) 4
for the Six Months Ended June 30, 1997 and 1996
Notes to Consolidated Financial Statements (Unaudited) 5
Management's Discussion and Analysis of Financial 6-8
Condition and Results of Operations
PART II - Other Information 9
<PAGE>
WORLDTEX, INC.
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
----------- ------------
(Unaudited)
ASSETS
Current assets:
<S> <C> <C>
Cash $ 7,754 2,117
Accounts and notes receivable, less allowance
for doubtful accounts of $2,589 in 1997
and $2,589 in 1996 38,204 39,868
Inventories:
Raw materials 12,312 12,614
Work-in-process 7,009 6,428
Finished goods 17,541 18,223
------ ------
Total inventories 36,862 37,265
Prepaid expenses and other current assets 3,164 2,975
------ ------
Total current assets 85,984 82,225
Property, plant and equipment, at cost:
Land 2,245 2,471
Buildings and leasehold improvements 29,329 31,181
Machinery and equipment 89,552 91,008
------- -------
121,126 124,660
Less accumulated depreciation and amortization 35,766 34,378
------- -------
Property, plant and equipment - net 85,360 90,282
Other assets 4,279 5,147
Cost in excess of net assets of acquired businesses,
net of accumulated amortization of $7,152 in 1997
and $7,115 in 1996 25,963 28,378
------- -------
$ 201,586 206,032
======= =======
</TABLE>
See accompanying notes to consolidated financial statements
<PAGE>
WORLDTEX, INC.
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
---- ----
LIABILITIES AND STOCKHOLDERS' EQUITY (Unaudited)
Current liabilities:
<S> <C> <C>
Short-term borrowings $ 2,089 1,342
Current installments of long-term debt 763 1,634
Accounts and notes payable - trade
and other liabilities 28,845 30,254
Income taxes payable 1,399 1,525
------- -------
Total current liabilities 33,096 34,755
Long-term debt 70,475 67,754
Other long-term liabilities 1,218 1,316
Deferred income taxes 16,249 17,029
------- -------
Total liabilities 121,038 120,854
Stockholders' equity:
Preferred stock - -
Common stock 147 147
Paid-in capital 30,059 29,946
Retained earnings 61,614 56,919
Cumulative foreign translation adjustment (9,774) (336)
Treasury stock, at cost (1,498) (1,498)
-------- --------
Total stockholders' equity 80,548 85,178
Commitments and contingencies -------- --------
$201,586 $206,032
======== ========
</TABLE>
See accompanying notes to consolidated financial statements
<PAGE>
WORLDTEX, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Dollars and shares in thousands except per share amounts)
UNAUDITED
<TABLE>
<CAPTION>
Six Months Ended Three Months Ended
June 30, June 30,
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales $ 102,798 105,039 51,880 53,140
Cost of goods sold 84,612 85,014 42,936 42,861
--------- ------- ------ ------
Gross profit 18,186 20,025 8,944 10,279
Selling & administration 8,054 7,948 4,274 4,108
expense --------- ------- ------ ------
Operating profit 10,132 12,077 4,670 6,171
Interest expense (2,900) (2,803) (1,494) (1,273)
Other income (expense) - net 92 227 22 224
--------- ------- ------ ------
Income before income taxes 7,324 9,501 3,198 5,122
Provision for income taxes 2,629 3,575 1,169 1,896
--------- ------- ------ ------
Net income $ 4,695 5,926 2,029 3,226
========= ======= ====== ======
Net income per share $ 0.32 0.41 0.14 0.22
========= ======= ====== ======
Weighted average shares
outstanding 14,836 14,571 14,740 14,592
========= ======= ====== ======
</TABLE>
See accompanying notes to consolidated financial statements
<PAGE>
WORLDTEX, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
UNAUDITED
<TABLE>
<CAPTION>
Six Months Ended
June 30,
1997 1996
------ ------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 4,695 5,926
Adjustments to reconcile net income
to net cash provided by
operating activities:
Depreciation and amortization 3,137 2,846
Provision for losses on accounts receivable 104 251
Deferred income taxes 367 1,165
Change in assets and liabilities:
Accounts and notes receivable (1,685) (5,521)
Inventories (2,106) (2,180)
Prepaid expenses and other current assets (327) (576)
Accounts and notes payable - trade and
other current liabilities 502 5,093
Income taxes payable 165 (1,527)
-------- ---------
Net cash provided by
operating activities 4,852 5,477
-------- --------
Cash flows from investing activities:
Capital expenditures (3,714) (9,028)
Other investing activities 846 (211)
-------- ---------
Net cash used in investing activities (2,868) (9,239)
-------- --------
Cash flows from financing activities:
Borrowings under line of credit arrangements 2,178 1,153
Payments under line of credit arrangements (1,431) (1,072)
Borrowings under revolving credit facility 49,130 57,970
Payments under revolving credit facility (45,710) (52,800)
Stock issued 113 5
Other financing activities (997) (643)
-------- --------
Net cash provided by financing activities 3,283 4,613
-------- --------
Effects of exchange rate changes on cash 370 154
-------- --------
Net increase in cash 5,637 1,005
Cash at beginning of year 2,117 1,845
-------- --------
Cash at end of period $ 7,754 2,850
======== ========
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest $ 2,762 2,725
======== =====
Income taxes $ 3,535 4,573
======== =====
</TABLE>
See accompanying notes to consolidated financial statements
<PAGE>
WORLDTEX, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
UNAUDITED
1. In the opinion of the Company, the accompanying unaudited consolidated
financial statements contain all adjustments (consisting of only normal
recurring accruals) necessary to present fairly the financial position and
results of operations for the interim periods reported hereon. It is
suggested that these consolidated financial statements be read in
conjunction with the consolidated financial statements and the notes
thereto included in the Company's annual report for the fiscal year ended
December 31, 1996. The December 31, 1996 amounts included in the financial
statements are derived from December 31, 1996 audited financial statements
and notes thereto.
<PAGE>
WORLDTEX, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Results of Operations
- ---------------------
Sales for the six months ended June 30, 1997 were $102.8 million and net income
was $4.7 million compared with sales of $105 million and net income of $5.9
million for the comparable period in 1996. Net income per share was $.32 for the
1997 six month period compared with $.41 in 1996. Sales for the quarter ended
June 30, 1997 were $51.9 million and net income was $2 million, compared with
sales of $53.1 million and net income of $3.2 million for the comparable 1996
period. Net income per share was $.14 for the second quarter of 1997 compared
with $.22 in the 1996 period.
The following table sets forth the percentages which certain income and expense
items bear to net sales:
<TABLE>
<CAPTION>
Six Months Ended Three Months Ended
June 30, June 30,
1997 1996 1997 1996
----- ----- ----- -----
<S> <C> <C> <C> <C>
Net sales 100.0% 100.0% 100.0% 100.0%
----- ----- ----- -----
Gross margin 17.7% 19.1% 17.2% 19.3%
Selling and administration expense 7.8% 7.6% 8.2% 7.7%
----- ----- ----- -----
Operating profit 9.9% 11.5% 9.0% 11.6%
Interest expense (2.8%) (2.7%) (2.8%) (2.4%)
Other income (expense) - net - .2% - .4%
----- ----- ----- -----
Income before income taxes 7.1% 9.0% 6.2% 9.6%
----- ----- ----- -----
</TABLE>
For the six months ended June 30, 1997, sales decreased by $2.2 million or 2.1%
compared with the six months ended June 30, 1996. For the quarter ended June 30,
1997, sales decreased by $1.3 million or 2.4% compared with the 1996 quarter.
Sales from North American operations increased 11.2% and 11.8% for the six
months and the three months ended June 30, 1997 from the corresponding periods
in 1996. Sales from French operations decreased 12.1% and 10.7% for the six
months and the three months ended June 30, 1997 from the corresponding periods
in 1996. The effect of the stronger U.S. dollar versus the French Franc on
currency translation for financial reporting purposes reduced the French
subsidiary sales by approximately 9.9% and 11.1% for the six months and the
<PAGE>
WORLDTEX, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
three months ended June 30, 1997 compared with the corresponding periods in
1996. Sales in the Company's South American operation increased 4.3% and
decreased 16.1% (excluding intercompany sales of $4.4 million and $2.7 million
for the six and three month periods of 1997 and $2 million and $1.1 million for
the six and three month periods of 1996) for the six months and the three months
ended June 30, 1997 from the corresponding periods in 1996. The decrease in
sales for the South American operations (excluding intercompany sales) for the
three months ending June 30, 1997, was primarily attributable to increased
utilization of capacity for intercompany sales. The effect of the reduced value
of the Colombian Peso on currency translation for financial reporting purposes
lowered South American sales by approximately 2.7% and 3% for the six months and
the three months ended June 30, 1997 compared with the corresponding periods in
1996.
The volume increases for the six and three months of 1997 in North America were
due primarily to increased market share and expanding diversification into
markets that offer higher margins. Sales from the French operations, before
currency translations for reporting purposes, decreased approximately 2.2% for
the six months of 1997 compared with the six months of 1996 primarily due to one
less working day in the 1997 period and to soft economic conditions in Europe.
The volume increases in South America reflect the continuing efforts to expand
production in the Company's lower cost operation.
Gross profit margins decreased primarily because the Company's costs were spread
over lower sales. Gross profit margins also decreased due to an unfavorable
change in the French subsidiary product mix. Selling and administrative expenses
increased as a percentage of net sales because the fixed component of these
expenses was spread over a lower sales base.
Interest expense for the six months and the three months ending June 30, 1997
increased from the corresponding periods in 1996 primarily due to higher
effective interest rates.
The Company had an effective income tax rate of 35.9% and 38.6% for the six
months and the three months ended June 30, 1997 compared to 37.6% and 37.0% for
the same periods in 1996. This decrease resulted primarily because of a lower
effective tax rate attributable to the Company's South American operation.
France's Socialist-led government announced it will seek to raise corporate
income taxes from the current 36.67% tax rate to an approximate rate of 41.67%.
Taxes on current year income will depend on any change in tax rate and the
effective date of such change. The effect on deferred tax assets and liabilities
of a change in tax rates will be reflected in the Company's financial statements
in the period that includes the enactment date.
LIQUIDITY; CAPITAL RESOURCES
- ----------------------------
The Company meets both its long-term and short-term liquidity needs through
internally generated funds and outside borrowings.
At June 30, 1997, $15.8 million was outstanding under the Company's Revolving
Credit Agreement and approximately $19.2 million was available for future
<PAGE>
WORLDTEX, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
borrowings. In addition, Filix Lastex, S.A., Rubyco (1987), Inc., and Fibrexa
Ltda., had available approximately $15.3 million, $1.1 million, and $2.8
million, respectively, under various bank lines of credit and overdraft
facilities. At June 30, 1997, Filix, Rubyco and Fibrexa had outstanding debt
under these agreements of $0, $0 and $2.1 million, respectively. The most
restrictive covenant of the Company's Credit Agreement and Note Agreement limit
short-term borrowings by the Company's subsidiaries to a total of approximately
$15.6 million at June 30, 1997. Worldtex believes that these lines of credit,
together with internally generated funds and access to other financing sources,
will provide sufficient liquidity for the Company's expected short-term and
long-term cash requirements.
Cash totaled $7.8 million at June 30, 1997, representing a net increase of $5.6
million for the six months then ended. Cash flows from operating activities and
from financing activities are the principal indicators of the Company's
liquidity. During the first six months of 1997, $4.9 million was generated from
operating activities as a result of net income, adjusted for the effects of
depreciation and amortization and changes in the balances of receivables,
payables, inventories and prepaid expenses and other current assets. During the
first six months of 1997, financing activities contributed $3.3 million,
reflecting routine borrowings and repayments under the Company's credit
facilities. During the first six months of 1997, $2.9 million was applied toward
the purchase of additional equipment and other investing activities, including
the upgrading of certain equipment. The Company anticipates that its capital
expenditures during 1997 will approximate $10 million, primarily for the
purchase of equipment.
Working capital was $52.9 million at June 30, 1997, and $47.5 million at
December 31, 1996, reflecting an increase of $5.4 million and current ratios of
2.6 and 2.4 respectively, at June 30, 1997 and December 31, 1996.
On August 7, 1997, the Company announced that it had signed a letter of intent
to purchase the narrow elastic fabric business of Texfi Industries, Inc., which
business is expected to have 1997 sales of approximately $21 million. The
purchase is subject to certain conditions, including the approval by the Board
of Directors of the Company and Texfi, due diligence and the execution of a
definitive purchase agreement. The purchase price will be paid in cash from cash
on hand and borrowings under the Company's Revolving Credit Agreement. The
proposed acquisition is pursuant to the Company's current plans to seek
acquisitions of companies in niche positions manufacturing value added products
comparable to the Company's existing product lines.
<PAGE>
WORLDTEX, INC.
PART II - OTHER INFORMATION
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company held its annual meeting of stockholders on May 7, 1997. At the
meeting, the following persons were elected as directors of the Company by the
votes indicated below:
<TABLE>
<CAPTION>
Authority
Name For Withheld
- ---- --- --------
<S> <C> <C>
Barry D. Setzer 11,718,624 70,770
Salim M. Ibrahim 11,718,624 70,770
</TABLE>
In addition, the terms as directors of the Company of Claude D. Egler, John B.
Fraser, Richard J. Mackey, Willi Roelli, Michael B. Wilson, and John K. Ziegler
continued after the annual meeting.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
<TABLE>
<CAPTION>
(a) Exhibits
EXHIBIT NO. DESCRIPTION
----------- -----------
<S> <C>
11.1 Computation of earnings per share
27.1 Financial Data Schedule (filed with EDGAR only)
(b) Reports on Form 8-K
</TABLE>
During the quarter ended June 30, 1997, the Company did not file any
reports on Form 8-K.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
WORLDTEX, INC.
(Registrant)
Date August 11, 1997 By /S/ RICHARD J. MACKEY
---------------------------
Richard J. Mackey
Chairman of the Board
and Chief Financial Officer
EXHIBIT 11.1
WORLDTEX, INC.
COMPUTATION OF EARNINGS PER SHARE
(Dollars in thousands except per share amounts)
<TABLE>
<CAPTION>
Six Months Ended Three Months Ended
June 30, June 30,
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net income $ 4,695 5,926 2,029 3,226
========== ========== ========== ==========
Shares:
Weighted average number
of shares outstanding 14,410,785 14,475,571 14,416,660 14,475,571
Assumed exercise of options 424,745 95,394 323,783 115,948
---------- ---------- ---------- ---------
Total average number of common
and common equivalent
shares used for primary
computation 14,835,530 14,570,965 14,740,443 14,591,519
========== ========== ========== ==========
Primary earnings per share (1) $ .32 .41 .14 .22
========== ========== ========== ==========
Shares:
Weighted average number of shares
outstanding 14,410,785 14,475,571 14,416,660 14,475,571
Assumed exercise of options 409,812 128,510 409,812 128,510
========== =========== ========== ==========
Total average number of common and
common equivalent
shares used for fully diluted
computation 14,820,597 14,604,081 14,826,472 14,604,081
========== ========== ========== ==========
Fully diluted earnings per share (2) $ .32 .41 .14 .22
========== ========== ========== ==========
<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>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM WORLDTEX,
INC. FORM 10-Q FOR THE PERIOD ENDED JUNE 30, 1997 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 7,754
<SECURITIES> 0
<RECEIVABLES> 38,204
<ALLOWANCES> 2,589
<INVENTORY> 36,862
<CURRENT-ASSETS> 85,984
<PP&E> 121,126
<DEPRECIATION> 35,766
<TOTAL-ASSETS> 201,586
<CURRENT-LIABILITIES> 33,096
<BONDS> 70,475
0
0
<COMMON> 147
<OTHER-SE> 80,401
<TOTAL-LIABILITY-AND-EQUITY> 201,586
<SALES> 102,798
<TOTAL-REVENUES> 102,798
<CGS> 84,612
<TOTAL-COSTS> 84,612
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 104
<INTEREST-EXPENSE> 2,900
<INCOME-PRETAX> 7,324
<INCOME-TAX> 2,629
<INCOME-CONTINUING> 4,695
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,695
<EPS-PRIMARY> .32
<EPS-DILUTED> .32
</TABLE>
