FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 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:
<TABLE>
<CAPTION>
DATE CLASS SHARES OUTSTANDING
---- ----- ------------------
<S> <C> <C>
March 31, 1997 Common Stock 14,405,671
</TABLE>
<PAGE>
WORLDTEX, INC.
INDEX
-----
<TABLE>
<CAPTION>
PAGE NUMBER
-----------
<S> <C> <C>
PART I - Financial Information
Consolidated Balance Sheets at March 31, 1
1997 (Unaudited) and December 31, 1996
Consolidated Statements of Income
(Unaudited) for the Three Months
Ended March 31, 1997 and 1996 2
Consolidated Statements of Cash
Flows (Unaudited) for the Three
Months Ended March 31, 1997 and 1996 3
Notes to Consolidated Financial
Statements (Unaudited) 4
Management's Discussion and Analysis
of Financial Condition and Results
of Operations 5 - 7
PART II - Other Information 8
</TABLE>
<PAGE>
WORLDTEX, INC.
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
--------- -----------
(UNAUDITED)
ASSETS
<S> <C> <C>
Current assets:
Cash $ 4,337 2,117
Accounts and notes receivable, less allowance
for doubtful accounts of $2,564 in 1997 and
$2,589 in 1996 39,458 39,868
Inventories:
Raw materials 12,339 12,614
Work-in-process 6,113 6,428
Finished goods 18,657 18,223
--------- ---------
Total inventories 37,109 37,265
Prepaid expenses and other current assets 3,656 2,975
--------- ---------
Total current assets 84,560 82,225
Property, plant and equipment, at cost:
Land 2,316 2,471
Buildings and leasehold improvements 29,883 31,181
Machinery and equipment 89,099 91,008
--------- ---------
Less accumulated depreciation and amortization 34,747 34,378
--------- ---------
Property, plant and equipment - net 86,551 90,282
Other assets 5,119 5,147
Cost in excess of net assets of acquired businesses,
net of accumulated amortization of $7,052 in 1997
and $7,115 in 1996 26,807 28,378
--------- ---------
$ 203,037 206,032
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term borrowings $ 2,412 1,342
Current installments of long-term debt 1,259 1,634
Accounts and notes payable - trade and other
liabilities 27,181 30,254
Income taxes payable 1,729 1,525
--------- ---------
Total current liabilities 32,581 34,755
Long-term debt 71,402 67,754
Other long-term liabilities 1,244 1,316
Deferred income taxes 16,358 17,029
--------- ---------
Total liabilities 121,585 120,854
Stockholders' equity:
Preferred stock - -
Common stock 147 147
Paid-in capital 29,963 29,946
Retained earnings 59,585 56,919
Cumulative foreign translation adjustment (6,745) (336)
Treasury stock, at cost (1,498) (1,498)
--------- ---------
Total stockholders' equity 81,452 85,178
--------- ---------
Commitments and contingencies $ 203,037 206,032
========= =========
</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>
Three Months Ended
March 31,
1997 1996
---- ----
<S> <C> <C>
Net sales $ 50,918 51,899
Cost of goods sold 41,676 42,153
-------- -------
Gross profit 9,242 9,746
Selling & administration expense 3,780 3,840
-------- -------
Operating profit 5,462 5,906
Interest expense (1,406) ( 1,530)
Other income (expense) - net 70 3
-------- -------
Income before income taxes 4,126 4,379
Provision for income taxes 1,460 1,679
-------- -------
Net income $ 2,666 2,700
======== =======
Net income per share $ 0.18 0.19
======== =======
Weighted average shares outstanding 14,930 14,548
======== =======
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
WORLDTEX, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
UNAUDITED
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1997 1996
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income $ 2,666 2,700
Adjustments to reconcile net income
to net cash provided by (used in)
operating activities:
Depreciation and amortization 1,544 1,306
Provision for losses on accounts
receivable 37 82
Deferred income taxes 111 464
Change in assets and liabilities:
Accounts and notes receivable ( 1,821) ( 3,190)
Inventories (1,557) 619
Prepaid expenses and other
current assets (770) 16
Accounts and notes payable -
trade and other current
liabilities
(1,804) (599)
Income taxes payable 404 553
------- --------
Net cash provided by (used in)
operating activities (1,190) 1,951
------- --------
Cash flows from investing activities:
Capital expenditures (1,653) (1,955)
Other investing activities 2 (826)
------- --------
Net cash used in investing
activities (1,651) (2,781)
------- --------
Cash flows from financing activities:
Borrowings under line of credit
arrangements 1,322 1,035
Payments under line of credit
arrangements (252) (1,000)
Borrowings under revolving credit
facility 27,040 22,890
Payments under revolving credit
facility (22,980) (19,360)
Stock issued 16 0
Other financing activities (421) (48)
------- --------
Net cash provided by financing
activities 4,725 3,517
------- --------
Effects of exchange rate
changes on cash 336 (35)
------- --------
Net increase in cash 2,220 2,652
Cash at beginning of year 2,117 1,845
------- --------
Cash at end of period $ 4,337 4,497
======= ========
Supplemental disclosure of cash flow
information:
Cash paid during the period for:
Interest $ 2,197 2,384
======= ========
Income taxes $ 1,927 1,014
======= ========
</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 three months ended March 31,1997 were $50.9 million and earnings
were $2.7 million compared with sales of $51.9 million and earnings of $2.7
million for the comparable period in 1996.
The following table sets forth the percentages which certain income and expense
items bear to net sales:
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1997 1996
---- ----
<S> <C> <C>
Net sales 100.0% 100.0%
------ -----
Gross margin 18.1% 18.8%
Selling and administration expense 7.4% 7.4%
------- ------
Operating profit 10.7% 11.4%
Interest expense ( 2.7%) ( 3.0%)
Other income (expense) - net .1% -
------ ------
Income before income taxes 8.1% 8.4%
------ ------
</TABLE>
For the three months ended March 31, 1997, sales decreased by $1 million or 1.9%
compared to the three months ended March 31, 1996.
Sales from North American operations increased 10.2% for the three months ended
March 31, 1997 from the corresponding period in 1996. Sales from French
operations decreased 13.2% for the three months ended March 31, 1997 from the
corresponding period in 1996. The stronger U.S. dollar versus the French Franc
reduced the French subsidiary sales by approximately 9.5% during the quarter.
Sales in the Company's South American operation increased 31.3% (excluding
intercompany sales) for the three months ended March 31, 1997 from the
corresponding period in 1996. The reduced value of the Colombian Peso lowered
South American sales by approximately 2.4% during the quarter.
The volume increase for the first quarter of 1997 in North America was due
primarily to increased market share and expanding diversification into markets
that offer higher margins. Sales from the French operations decreased over the
prior year same period due primarily to the weaker French Franc translated to
<PAGE>
WORLDTEX, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
U.S. dollars for reporting purposes. 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. Selling and administrative expenses decreased 1.6% but did not
change as a percentage of net sales.
Interest expense for the three months ending March 31, 1997 decreased from the
corresponding period in 1996 due to lower average effective interest rates.
The Company had an effective income tax rate of 35.4% for the three months ended
March 31, 1997 compared to 38.3% for the same period in 1996. This decrease
resulted primarily because of a lower effective tax rate attributable to the
Company's South American operation.
LIQUIDITY; CAPITAL RESOURCES
- -----------------------------
The Company meets both its long-term and short-term liquidity needs through
internally generated funds and outside borrowings.
At March 31, 1997, $16.4 million was outstanding under the Company's Revolving
Credit Agreement and approximately $18.6 million was available for future
borrowings. In addition, Filix Lastex, S.A., Rubyco (1987), Inc., and Fibrexa
Ltda., had available approximately $16 million, $1.1 million, and $2.8 million,
respectively, under various bank lines of credit and overdraft facilities. At
March 31, 1997, Filix, Rubyco and Fibrexa had outstanding debt under these
agreements of $0, $.2 and $2.2 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 $15.5
million at March 31, 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 $4.3 million at March 31, 1997, representing a net increase of $2.2
million for the three months then ended. Cash flows from operating activities
and from financing activities are the principal indicators of the Company's
liquidity. During the first three months of 1997, $1.2 million was used in
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 three months of 1997, financing activities contributed $4.7 million,
reflecting routine borrowings and repayments under the Company's credit
facilities. During the first three months of 1997, $1.7 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 $12.9 million, primarily for
the purchase of equipment.
<PAGE>
WORLDTEX, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Working capital was $52.0 million at March 31, 1997, and $47.5 million at
December 31, 1996, reflecting an increase of $4.5 million and current ratios of
2.6 and 2.4 respectively, at March 31, 1997 and December 31, 1996.
<PAGE>
WORLDTEX, INC.
PART II - OTHER INFORMATION
<TABLE>
<CAPTION>
Item 6. Exhibits and Reports on Form 8-K
<S> <C> <C>
(a) Exhibits
Exhibit No. Description
11.1 Computation of earnings per share
27.1 Financial Data Schedule (filed
with EDGAR only)
</TABLE>
(b) Reports on Form 8-K
During the quarter ended March 31, 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 May 14, 1997 By_________________________________
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>
Three Months Ended
March 31,
1997 1996
---- ----
<S> <C> <C>
Net income $ 2,666 2,700
========== =========
Shares:
Weighted average number of shares outstanding 14,404,410 14,475,571
Assumed exercise of options 526,071 71,986
---------- ----------
Total average number of common and common
equivalent shares used for primary computation 14,930,481 14,547,557
========== ==========
Primary earnings per share 1 $ .18 .19
========== ==========
Shares:
Weighted average number of shares outstanding 14,404,410 14,475,571
Assumed exercise of options 526,071 71,986
---------- ----------
Total average number of common and common
equivalent shares used for fully diluted
computation 14,930,481 14,547,557
========== ==========
Fully diluted earnings per share 2 $ .18 .19
========== ==========
- --------
<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 MARCH 31, 1997 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 4,337
<SECURITIES> 0
<RECEIVABLES> 42,022
<ALLOWANCES> 2,564
<INVENTORY> 37,109
<CURRENT-ASSETS> 84,560
<PP&E> 121,298
<DEPRECIATION> 34,747
<TOTAL-ASSETS> 203,037
<CURRENT-LIABILITIES> 32,581
<BONDS> 71,402
0
0
<COMMON> 147
<OTHER-SE> 81,305
<TOTAL-LIABILITY-AND-EQUITY> 203,037
<SALES> 50,918
<TOTAL-REVENUES> 50,918
<CGS> 41,676
<TOTAL-COSTS> 41,676
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 37
<INTEREST-EXPENSE> 1,406
<INCOME-PRETAX> 4,126
<INCOME-TAX> 1,460
<INCOME-CONTINUING> 2,666
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,666
<EPS-PRIMARY> .18
<EPS-DILUTED> .18
</TABLE>
