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Previous: HAGGAR CORP, 10-Q, 1998-05-15 |
Next: SPORT HALEY INC, 10-Q, 1998-05-15 |
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, 1998
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
- -------------- ------------ ------------------
March 31, 1998 Common Stock 14,428,671
<PAGE>
WORLDTEX, INC.
INDEX
-----
PAGE NUMBER
-----------
PART I - Financial Information
Consolidated Balance Sheets at March 31, 1998 (Unaudited)
and December 31, 1997 1
Consolidated Statements of Income (Unaudited) for the
Three Months Ended March 31, 1998 and 1997 2
Consolidated Statements of Cash Flows (Unaudited) for the
Three Months Ended March 31, 1998 and 1997 3
Notes to Consolidated Financial Statements (Unaudited) 4 - 9
Management's Discussion and Analysis of Financial
Condition and Results of Operations 10 - 12
PART II - Other Information 13
<PAGE>
<TABLE>
<CAPTION>
WORLDTEX, INC.
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
March 31, December 31,
1998 1997
---- ----
ASSETS (Unaudited)
<S> <C> <C>
Current assets:
Cash $ 18,782 14,872
Accounts and notes receivable, less allowance for doubtful accounts of
$2,134 in 1998 and $2,085 in 1997 49,660 46,320
Inventories:
Raw materials 15,231 15,401
Work-in-process 15,551 13,976
Finished goods 23,206 24,823
--------- ---------
Total inventories 53,988 54,200
Prepaid expenses and other current assets 2,825 3,026
--------- ---------
Total current assets 125,255 118,418
Property, plant and equipment, at cost:
Land 2,772 2,820
Buildings and leasehold improvements 33,824 34,172
Machinery and equipment 100,725 99,083
--------- ---------
137,321 136,075
Less accumulated depreciation and amortization 38,256 36,915
--------- ---------
Property, plant and equipment - net 99,065 99,160
Other assets 12,266 11,946
Cost in excess of net assets of acquired businesses, net of accumulated
amortization of $8,100 in 1998 and $7,600 in 1997 81,890 82,915
--------- ---------
$ 318,476 312,439
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term borrowings $ 2,151 1,819
Current installments of long-term debt 590 620
Accounts and notes payable - trade and other liabilities 35,243 28,236
Income taxes payable 188 -
--------- ---------
Total current liabilities 38,172 30,675
Long-term debt 185,568 185,780
Other long-term liabilities 2,437 2,547
Deferred income taxes 15,220 15,935
--------- ---------
Total liabilities 241,397 234,937
Stockholders' equity:
Preferred stock - -
Common stock 147 147
Paid-in capital 30,059 30,059
Retained earnings 64,218 62,067
Accumulated other comprehensive income (15,847) (13,273)
Treasury stock, at cost (1,498) (1,498)
---------- ----------
Total stockholders' equity 77,079 77,502
Commitments and contingencies - -
--------- ---------
$ 318,476 312,439
========= =========
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
WORLDTEX, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Dollars and shares in thousands except per share amounts)
UNAUDITED
Three Months Ended
March 31,
1998 1997
---- ----
<S> <C> <C>
Net sales $69,229 50,918
Cost of goods sold 55,177 41,676
------- ------
Gross profit 14,052 9,242
Selling and administration expense 6,397 3,780
------- ------
Operating profit 7,655 5,462
Interest expense 4,547 1,439
Other income (expense) - net 236 103
------- ------
Income before income taxes 3,344 4,126
Provision for income taxes 1,193 1,460
------- ------
Net income $ 2,151 2,666
======= ======
Net income per share:
Basic $ 0.15 0.19
======= ======
Diluted $ 0.15 0.18
======= ======
Weighted average shares outstanding:
Basic 14,429 14,404
======= ======
Diluted 14,782 14,930
======= ======
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
WORLDTEX, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
UNAUDITED
Three Months Ended
March 31,
1998 1997
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income $ 2,151 2,666
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 2,371 1,544
Provision for losses on accounts receivable 132 37
Deferred income taxes (422) 111
Change in assets and liabilities:
Accounts and notes receivable (4,221) (1,821)
Inventories (532) (1,557)
Prepaid expenses and other current assets (101) (770)
Accounts and notes payable -
trade and other current liabilities 7,493 (1,804)
Income taxes payable 499 404
-------- -------
Net cash provided by (used in) operating activities 7,370 (1,190)
-------- -------
Cash flows from investing activities:
Capital expenditures (3,323) (1,653)
Other investing activities (315) 2
-------- -------
Net cash used in investing activities (3,638) (1,651)
-------- -------
Cash flows from financing activities:
Borrowings under line of credit arrangements 925 1,322
Payments under line of credit arrangements (506) (252)
Borrowings under revolving credit facility - 27,040
Payments under revolving credit facility - (22,980)
Stock issued - 16
Other financing activities (310) (421)
-------- -------
Net cash provided by financing activities 109 4,725
-------- -------
Effects of exchange rate changes on cash 69 336
-------- -------
Net increase in cash 3,910 2,220
Cash at beginning of year 14,872 2,117
-------- -------
Cash at end of period $ 18,782 4,337
======== =======
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest $ 453 2,197
======== =======
Income taxes $ 3,662 1,927
======== =======
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
WORLDTEX, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
UNAUDITED
(Dollars in thousands)
Note 1 - Basis of Presentation
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, 1997. The
December 31, 1997 amounts included in the financial statements are derived from
December 31, 1997 audited financial statements and notes thereto.
Note 2 - Comprehensive Income
The Company adopted Statement of Financial Accounting Standards No. 130,
Reporting Comprehensive Income, effective January 1, 1998. Foreign currency
translation adjustments were reductions of $2,574 and $6,409 for the three
months ended March 31, 1998 and 1997, respectively. No other comprehensive
income items were recorded by the Company in 1998 or 1997. Comprehensive loss
for the three month period ended March 31, 1998 and 1997 was $423 and $3,743,
respectively.
Note 3 - Supplemental Consolidating Financial Information
The $175,000 Senior Notes are guaranteed by each of the U.S. subsidiaries
of the Company, which consist of Regal Manufacturing Company, Inc., Willcox &
Gibbs Filix of Delaware, Inc., Regal Yarns of Argentina, Inc., WTX Colombia I,
Inc., WTX Colombia II, Inc., Elastic Corporation of America, Inc., and Elastex,
Inc. The guarantor subsidiaries are wholly owned subsidiaries of the Company and
the guarantees are full, unconditional and joint and several. There are no
restrictions on the ability of the guarantor subsidiaries to make distributions
to the Company, except those generally applicable under relevant corporation
laws. Separate financial statements of each guarantor subsidiary have not been
presented because management has determined that they are not material to
investors. The following pages include summarized consolidating financial
information for the Company, segregating the parent, the guarantor subsidiaries
and nonguarantor subsidiaries.
Notes to consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
WORLDTEX, INC.
Note 3 - Supplemental Consolidating Financial Information
(Dollars in thousands)
(Unaudited)
Consolidating Balance Sheet Information
March 31, 1998
Guarantor Non-Guarantor
Domestic Foreign
WORLDTEX, INC. SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
-------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Assets
Current Assets
Cash $ 12,219 90 6,473 - 18,782
Accounts and notes receivable, net 94 22,771 26,795 - 49,660
Inventories - 29,963 24,025 - 53,988
Prepaid expenses and other current assets 1,380 525 920 - 2,825
--------- --------- --------- ---------
Total current assets 13,693 53,349 58,213 - 125,255
Property, plant and equipment, net 223 47,942 50,900 - 99,065
Other assets 9,487 1,826 953 - 12,266
Cost in excess of net assets of acquired
businesses, net 56 64,173 17,661 - 81,890
Intercompany investments 102,956 - - (102,956) -
Intercompany advances 145,177 14,798 - (159,975) -
--------- --------- --------- --------- ---------
$ 271,592 182,088 127,727 (262,931) 318,476
========= ========= ========= ========= =========
Liabilities and Stockholders' Equity
Current Liabilities
Short-term borrowings $ - - 2,151 - 2,151
Current installments of long-term debt - - 590 - 590
Accounts and notes payable-trade and other
liabilities 6,856 11,940 16,447 - 35,243
Income taxes payable 735 (1,780) 1,233 - 188
--------- --------- --------- ---------
Total current liabilities 7,591 10,160 20,421 - 38,172
Long-term debt 175,000 6,000 4,568 - 185,568
Other long-term liabilities - - 2,437 - 2,437
Deferred income taxes (2,876) 7,279 10,817 - 15,220
Intercompany payables 14,798 122,998 22,179 (159,975) 0
--------- --------- --------- --------- ---------
Total liabilities 194,513 146,437 60,422 (159,975) 241,397
--------- --------- --------- --------- ---------
Stockholders' equity
Preferred stock - - - - -
Common stock 147 49 31,778 (31,827) 147
Paid-in capital 30,059 15,822 - (15,822) 30,059
Retained earnings 64,218 19,780 51,374 (71,154) 64,218
Accumulated other comprehensive income (15,847) - (15,847) 15,847 (15,847)
Less-Treasury stock, at cost (1,498) - - - (1,498)
--------- --------- --------- --------- ---------
Total stockholders' equity 77,079 35,651 67,305 (102,956) 77,079
--------- --------- --------- --------- ---------
$ 271,592 182,088 127,727 (262,931) 318,476
========= ========= ========= ========= =========
Notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
WORLDTEX, INC.
Note 3 - Supplemental Consolidating Financial Information
(Dollars in thousands)
(Unaudited)
Consolidating Balance Sheet Information
December 31, 1997
Guarantor Non-Guarantor
Domestic Foreign
WORLDTEX, INC. SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
-------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Assets
Current Assets
Cash $ 10,058 321 4,493 - 14,872
Accounts and notes receivable, net - 20,870 25,450 - 46,320
Inventories - 28,251 25,949 - 54,200
Prepaid expenses and other current assets 1,402 511 1,113 - 3,026
--------- --------- --------- ---------
Total current assets 11,460 49,953 57,005 - 118,418
Property, plant and equipment, net 230 46,977 51,953 - 99,160
Other assets 9,480 1,495 971 - 11,946
Cost in excess of net assets of acquired
businesses, net - 64,619 18,296 - 82,915
Intercompany investments 102,246 - - (102,246) -
Intercompany advances 146,164 14,798 - (160,962) -
--------- --------- --------- --------- ---------
$ 269,580 177,842 128,225 (263,208) 312,439
========= ========= ========= ========= =========
Liabilities and Stockholders' Equity
Current Liabilities
Short-term borrowings $ - - 1,819 - 1,819
Current installments of long-term debt - - 620 - 620
Accounts and notes payable-trade and other
liabilities 3,600 8,529 16,107 - 28,236
Income taxes payable 567 (1,785) 1,218 - 0
--------- --------- --------- --------- ---------
Total current liabilities 4,167 6,744 19,764 - 30,675
--------- --------- --------- --------- ---------
Long-term debt 175,000 6,000 4,780 - 185,780
Other long-term liabilities - - 2,547 - 2,547
Deferred income taxes (1,887) 6,820 11,002 - 15,935
Intercompany payables 14,798 123,577 22,587 (160,962) -
--------- --------- --------- --------- ---------
Total liabilities 192,078 143,141 60,680 (160,962) 234,937
--------- --------- --------- --------- ---------
Stockholders' equity
Preferred stock - - - - -
Common stock 147 49 31,778 (31,827) 147
Paid-in capital 30,059 15,822 - (15,822) 30,059
Retained earnings 62,067 18,830 49,040 (67,870) 62,067
Accumulated other comprehensive income (13,273) - (13,273) 13,273 (13,273)
Less-Treasury stock, at cost (1,498) - - - (1,498)
--------- --------- --------- --------- ---------
Total stockholders' equity 77,502 34,701 67,545 (102,246) 77,502
--------- --------- --------- --------- ---------
$ 269,580 177,842 128,225 (263,208) 312,439
========= ========= ========= ========= =========
Notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
WORLDTEX, INC.
Note 3 - Supplemental Consolidating Financial Information
(Dollars in thousands)
(Unaudited)
Consolidating Statements of Income Information
March 31, 1998
Guarantor Non-Guarantor
Domestic Foreign
WORLDTEX, INC. SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
-------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net sales $ - 38,691 33,577 (3,039) 69,229
Cost of goods sold - 31,553 26,663 (3,039) 55,177
--------- --------- --------- --------- ---------
Gross profit - 7,138 6,914 - 14,052
Selling and administrative expense 729 3,195 2,473 - 6,397
--------- --------- --------- ---------
Operating profit (loss) (729) 3,943 4,441 - 7,655
Interest expense 4,153 138 256 - 4,547
Intercompany interest expense (income) (2,239) 1,889 350 - -
Intercompany administrative charges (727) 477 250 - -
Other income - net 209 16 11 - 236
--------- --------- --------- ---------
Income before income taxes (1,707) 1,455 3,596 - 3,344
Provision for income taxes (575) 505 1,263 - 1,193
Undistributed earnings of subsidiaries 3,283 - - (3,283) -
--------- --------- --------- --------- ---------
Net income $ 2,151 950 2,333 (3,283) 2,151
========= ========= ========= ========= =========
</TABLE>
<TABLE>
<CAPTION>
Consolidating Statements of Income Guarantor Non-Guarantor
Information Domestic Foreign
March 31, 1998 WORLDTEX, INC. SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
-------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net sales $ - 17,105 36,577 (2,764) 50,918
Cost of goods sold - 15,035 29,405 (2,764) 41,676
--------- --------- --------- --------- ---------
Gross profit - 2,070 7,172 - 9,242
Selling and administrative expense 526 769 2,485 - 3,780
--------- --------- --------- ---------
Operating profit (loss) (526) 1,301 4,687 - 5,462
Interest expense 1,181 52 206 - 1,439
Intercompany interest expense (income) (680) 248 432 - -
Intercompany administrative charges (863) 466 397 - -
Other income - net 28 15 60 - 103
--------- --------- --------- ---------
Income before income taxes (136) 550 3,712 - 4,126
Provision for income taxes 13 154 1,293 - 1,460
Undistributed earnings of subsidiaries 2,815 - - (2,815) -
--------- --------- --------- --------- ---------
Net income $ 2,666 396 2,419 (2,815) 2,666
========= ========= ========= ========= =========
Notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
WORLDTEX, INC.
Note 3 - Supplemental Consolidating Financial Information
(Dollars in thousands)
(Unaudited)
Consolidating Statements of Cash Flows Information
March 31, 1998
Guarantor Non-Guarantor
Domestic Foreign
WORLDTEX, INC. SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
-------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net income $ 2,151 950 2,333 (3,283) 2,151
Adjustments to reconcile net income to net
cash provided by operating activities:
Undistributed earnings of subsidiaries (3,283) - - 3,283 -
Depreciation and amortization 10 1,351 1,010 - 2,371
Provision for losses on accounts - 76 56 - 132
receivable
Deferred income taxes (989) 458 109 - (422)
Change in assets and liabilities
net of effects of acquisitions:
Accounts and notes receivable (94) (1,977) (2,150) - (4,221)
Inventories 1 (1,713) (1,180) - (532)
Prepaid expenses and other current (253) (15) 167 - (101)
assets
Accounts and notes payable - trade and 3,256 3,410 827 - 7,493
other current liabilities
Income taxes payable 443 5 51 - 499
--------- --------- --------- --------- ---------
Net cash provided by (used in)
operating activities 1,242 2,545 3,583 - 7,370
--------- --------- --------- --------- ---------
Cash flows from investing activities:
Capital expenditures (1) (1,871) (1,451) - (3,323)
Acquisitions, net of cash acquired 2,517 - - (2,517) -
Other investing activities 25 (329) (11) - (315)
--------- --------- --------- --------- ---------
Net cash used in investing activities 2,541 (2,200) (1,462) (2,517) 3,638)
--------- --------- --------- --------- ---------
Cash flows from financing activities:
Borrowings under line of credit - - 925 - 925
arrangements
Payments under line of credit - - (506) - (506)
arrangements
Advances - affiliated companies 983 (576) (366) (41) -
Other financing activities (31) - (43) (236) (310)
--------- --------- --------- --------- ---------
Net cash provided by (used in)
financing activities 952 (576) 10 (277) 109
--------- --------- --------- --------- ---------
Effects of exchange rate changes in cash (2,574) - (151) 2,794 69
--------- --------- --------- --------- ---------
Net increase in cash 2,161 (231) 1,980 - 3,910
Cash at beginning of year 10,058 321 4,493 - 14,872
--------- --------- --------- --------- ---------
Cash at end of year $ 12,219 90 6,473 - 18,782
========= ========= ========= ========= =========
Notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
WORLDTEX, INC.
Note 3 - Supplemental Consolidating Financial Information
(Dollars in thousands)
(Unaudited)
Consolidating Statements of Cash Flows Information
March 31, 1997
Guarantor Non-Guarantor
Domestic Foreign
WORLDTEX, INC. SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
-------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net income $ 2,666 396 2,419 (2,815) 2,666
Adjustments to reconcile net income to net
cash provided by operating activities:
Undistributed earnings of subsidiaries (2,815) - - 2,815 -
Depreciation and amortization 5 574 965 - 1,544
Provision for losses on accounts (1) (20) 58 - 37
receivable
Deferred income taxes 1,659 2 68 (1,618) 111
Change in assets and liabilities net of
effects of acquisitions:
Accounts and notes receivable (201) (1,713) 93 - (1,821)
Inventories 1 (300) (1,258) - (1,557)
Prepaid expenses and other current (532) (175) (63) - (770)
assets
Accounts and notes payable -
trade and other current liabilities (650) 226 1,380 - (1,804)
Income taxes payable 102 21 281 - 404
--------- --------- --------- --------- ---------
Net cash provided by (used in)
operating activities 234 (989) 1,183 (1,618) (1,190)
--------- --------- --------- --------- ---------
Cash flows from investing activities:
Capital expenditures 4 (291) (1,366) - (1,653)
Acquisitions, net of cash acquired 6,409 - - (6,409) -
Other investing activities 30 (25) (3) - 2
--------- --------- --------- --------- ---------
Net cash used in investing activities 6,443 (316) (1,369) (6,409) (1,651)
--------- --------- --------- --------- ---------
Cash flows from financing activities:
Borrowings under line of credit - - 1,322 - 1,322
arrangements
Payments under line of credit - - (252) - (252)
arrangements
Borrowings under revolving credit 27,040 - - - 27,040
facility
Payments under revolving credit facility (22,980) - - - (22,980)
Stock issued or (reacquired), net 16 - - - 16
Advances - affiliated companies (3,256) 1,254 2,236 (234) -
Other financing activities (1,646) - 819 406 (421)
--------- --------- --------- --------- ---------
Net cash provided by (used in)
financing activities (826) 1,254 4,125 172 4,725
--------- --------- --------- --------- ---------
Effects of exchange rate changes in cash (6,408) - (1,111) 7,855 336
--------- --------- --------- --------- ---------
Net increase in cash (557) (51) 2,828 - 2,220
Cash at beginning of year 428 174 1,515 - 2,117
--------- --------- --------- --------- ---------
Cash at end of year $ (129) 123 4,343 - 4,337
========= ========= ========= ========= =========
Notes to consolidated financial statements.
</TABLE>
<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 31,1998 were $69.2 million and earnings
were $2.2 million compared with sales of $50.9 million and earnings of $2.7
million for the comparable period in 1997. The following table sets forth the
percentages which certain income and expense items bear to net sales:
<TABLE>
<CAPTION>
Three Months Ended
March 31,
------------------
1998 1997
---- ----
<S> <C> <C>
Net sales 100.0% 100.0%
------ ------
Gross margin 20.3% 18.1%
Selling and administration expense 9.2% 7.4%
------ ------
Operating profit 11.1% 10.7%
Interest expense 6.6% 2.8%
Other income (expense) - net .3% .2%
----- ------
Income before income taxes 4.8% 8.1%
===== ======
</TABLE>
For the three months ended March 31, 1998, sales increased by $18.3 million or
36.0% compared to the three months ended March 31, 1997.
Sales from North American operations increased 89.9% for the three months ended
March 31, 1998 from the corresponding period in 1997. The sharp increase in
sales was primarily due to the inclusion of the narrow elastic fabric
subsidiaries acquired in the fourth quarter of 1997. Excluding the contribution
of these new subsidiaries, North American sales for the first quarter of 1998
were flat compared with the 1997 period, principally due to overall weak demand
by ladies' hosiery customers and an ice storm in Canada, which interrupted
production and shipments.
Sales from French operations decreased 11.7% for the three months ended March
31, 1998 from the corresponding period in 1997. The stronger U.S. dollar versus
the French franc reduced the French subsidiary sales by approximately 9.7%
during the quarter (assuming currency translation of 1998 sales at the rate
applicable to 1997 results). European sales were also affected by continuing
softness in the general textile market in Europe.
Sales in the Company's South American operation increased 8.8% (excluding
intercompany sales) for the three months ended March 31, 1998 from the
corresponding period in 1997. The reduced value of the Colombian peso lowered
<PAGE>
WORLDTEX, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
South American sales by approximately 21.3% during the quarter (assuming
currency translation of 1998 sales at the rate applicable to 1997 results). The
volume increases in South America reflect the continuing efforts to expand
production in the Company's lower cost operation.
Gross profit margins increased to 20.3% in the 1998 period from 18.1% in 1997,
primarily because the Company's newly acquired narrow elastic fabrics operations
have traditionally produced higher margins than the Company's covered elastic
yarn operations. Gross profit margins also increased due to an improvement in
the French subsidiary's product mix over the prior year period, and because the
Company's manufacturing costs were spread over higher sales. Selling and
administrative expenses increased as a percentage of net sales to 9.2% from 7.4%
primarily because the fixed component of these expenses increased as a result of
the recent acquisitions.
Interest expense for the three months ending March 31, 1998 increased from the
corresponding period in 1997 due to the $175 million principal amount of 9 5/8%
Senior Notes issued December 1, 1997 in connection with the acquisitions of the
Company's narrow elastic fabric subsidiaries.
The Company had an effective income tax rate of 35.7% for the three months ended
March 31, 1998 compared to 35.4% for the same period in 1997. This increase
resulted primarily due to the higher French corporate tax rate of 41.67% enacted
in the fourth quarter of 1997, offset by additional income subject to lower
effective tax rates, primarily in 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.
Cash totaled $18.8 million at March 31, 1998, representing a net increase of
$3.9 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 1998, $7.4 million was
generated 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 1998, financing activities contributed
$.1 million, reflecting routine borrowings and repayments under the Company's
credit facilities. During the first three months of 1998, $3.6 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 1998 will approximate $12
million, primarily for the purchase of equipment.
<PAGE>
WORLDTEX, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
EBITDA represents income before income taxes plus interest expense, depreciation
and amortization and is provided as additional information relating to the
Company's debt service capacity. EBITDA for the three months ended March 31,
1998 and 1997 was $10.3 million and $7.1 million, respectively. Depreciation and
amortization for the three months ended March 31, 1998 and 1997 was $2.4 million
and $1.5 million, respectively.
Working capital was $87.1 million at March 31, 1998 and $87.7 million at
December 31, 1997, reflecting a decrease of $.6 million and current ratios of
3.3 and 3.9 respectively, at March 31, 1998 and December 31, 1997.
At March 31, 1998, the Company had outstanding $175 million principal amount of
Senior Notes. No amounts were outstanding under the Company's Credit Facility,
and $25 million was available to be borrowed thereunder. In addition, Filix
Lastex, S.A., Rubyco (1987), Inc., and Fibrexa, Ltda., had available
approximately $14.5 million, $1.1 million, and $4.8 million, respectively, under
various bank lines of credit and overdraft facilities. At March 31, 1998, Filix,
Rubyco and Fibrexa had outstanding debt under these agreements of $0, $0 and
$2.2 million, respectively. The most restrictive covenant of the Company's
Credit Facility and Indenture limits short-term borrowings by the Company's
subsidiaries to a total of $15 million.
Worldtex believes that its lines of credit, together with cash on hand,
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.
<PAGE>
WORLDTEX, INC.
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit No. Description
11.1 Statement re: Computation of per share earnings
27.1 Financial Data Schedule (filed with EDGAR only)
(b) Reports on Form 8-K
During the quarter ended March 31, 1998, 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, 1998 By: /S/ RICHARD J. MACKEY
-----------------------
Richard J. Mackey
Chairman of the Board
and Chief Financial Officer
EXHIBIT 11.1
WORLDTEX, INC.
STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS
(Dollars in thousands except share amounts)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1998 1997
---- ----
<S> <C> <C>
Net income $ 2,151 2,666
=========== ===========
shares:
Weighted average number of
shares outstanding 14,428,671 14,404,410
=========== ===========
Basic earnings per share (1) $ .15 .19
=========== ===========
Shares:
Weighted average number of
shares outstanding 14,428,671 14,547,557
Assumed exercise of options 352,856 526,071
----------- -----------
Total average number of common
and common equivalent shares
used for diluted computation 14,781,527 14,930,481
=========== ===========
Diluted earnings per share (2) $ .15 .18
============ ===========
</TABLE>
(1) Basic earnings per share are calculated based upon the weighted
average number of common shares outstanding during the period.
(2) Diluted earnings per share are calculated based upon the weighted
average number of common shares and common equivalent shares
outstanding during the period.
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Exhibit 27.1
Worldtex, Inc.
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM WORLDTEX,
INC. FORM 10-Q FOR THE PERIOD ENDED MARCH 31, 1998 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-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 18,782
<SECURITIES> 0
<RECEIVABLES> 49,660
<ALLOWANCES> 2,134
<INVENTORY> 53,988
<CURRENT-ASSETS> 125,255
<PP&E> 137,321
<DEPRECIATION> 38,256
<TOTAL-ASSETS> 318,476
<CURRENT-LIABILITIES> 38,172
<BONDS> 185,568
0
0
<COMMON> 147
<OTHER-SE> 76,932
<TOTAL-LIABILITY-AND-EQUITY> 318,476
<SALES> 69,229
<TOTAL-REVENUES> 69,229
<CGS> 55,177
<TOTAL-COSTS> 55,177
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 105
<INTEREST-EXPENSE> 4,547
<INCOME-PRETAX> 3,344
<INCOME-TAX> 1,193
<INCOME-CONTINUING> 2,151
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,151
<EPS-BASIC> .15
<EPS-DILUTED> .15
</TABLE>
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