FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 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
--------------- -------------- --------------------
June 30, 1998 Common Stock 14,434,671
<PAGE>
WORLDTEX, INC.
INDEX
-----
Page Number
-----------
PART I - Financial Information
Consolidated Balance Sheets at June 30, 1998
(Unaudited) and December 31, 1997 1
Consolidated Statements of Income (Unaudited) for
the Six Months and Three Months Ended June 30,
1998 and 1997 2
Consolidated Statements of Cash Flows (Unaudited)
for the Six Months Ended June 30, 1998 and 1997 3
Notes to Consolidated Financial Statements
(Unaudited) 4 - 10
Management's Discussion and Analysis of Financial
Condition and Results of Operations 11 - 13
PART II - Other Information 14
<PAGE>
WORLDTEX, INC.
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
---- ----
ASSETS (Unaudited)
<S> <C> <C>
Current assets:
Cash $ 11,625 14,872
Accounts and notes receivable, less allowance for
doubtful accounts of $1,708 in 1998 and $2,085 in 1997 49,591 46,320
Inventories:
Raw materials 16,260 15,401
Work-in-process 14,633 13,976
Finished goods 24,487 24,823
-------- --------
Total inventories 55,380 54,200
Prepaid expenses and other current assets 2,543 3,026
-------- --------
Total current assets 119,139 118,418
Property, plant and equipment, at cost:
Land 2,807 2,820
Buildings and leasehold improvements 34,230 34,172
Machinery and equipment 108,210 99,083
-------- --------
145,247 136,075
Less accumulated depreciation and amortization 40,063 36,915
-------- --------
Property, plant and equipment - net 105,184 99,160
Other assets 12,285 11,946
Cost in excess of net assets of acquired businesses, net of
accumulated amortization of $8,715 in 1998 and $7,600 in 1997 81,384 82,915
-------- --------
$317,992 312,439
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term borrowings $ 5,462 1,819
Current installments of long-term debt 578 620
Accounts and notes payable - trade and other liabilities 27,763 28,236
Income taxes payable 1,915 -
-------- --------
Total current liabilities 35,718 30,675
Long-term debt 186,117 185,780
Other long-term liabilities 2,452 2,547
Deferred income taxes 14,664 15,935
-------- --------
Total liabilities 238,951 234,937
Stockholders' equity:
Preferred stock - -
Common stock 147 147
Paid-in capital 30,084 30,059
Retained earnings 64,965 62,067
Accumulated other comprehensive income (14,657) (13,273)
Treasury stock, at cost (1,498) (1,498)
-------- --------
Total stockholders' equity 79,041 77,502
Commitments and contingencies - -
-------- --------
$317,992 312,439
======== ========
See accompanying notes to consolidated financial statements.
</TABLE>
<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,
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales $135,283 102,798 66,054 51,880
Cost of goods sold 108,413 84,612 53,236 42,936
-------- -------- -------- --------
Gross profit 26,870 18,186 12,818 8,944
Selling & administration expense 13,082 8,054 6,685 4,274
-------- -------- -------- --------
Operating profit 13,788 10,132 6,133 4,670
Interest expense 9,431 2,967 4,884 1,528
Other income - net 345 159 109 56
-------- -------- -------- --------
Income before income taxes 4,702 7,324 1,358 3,198
Provision for income taxes 1,803 2,629 610 1,169
-------- -------- -------- --------
Net income $ 2,899 4,695 748 2,029
======== ======== ======== ========
Net income per share
Basic $0.20 0.33 0.05 0.14
======== ======== ======== ========
Diluted $0.20 0.32 0.05 0.14
======== ======== ======== ========
Weighted average shares outstanding
Basic 14,431 14,411 14,433 14,417
======== ======== ======== ========
Diluted 14,758 14,836 14,735 14,740
======== ======== ======== ========
</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,
1998 1997
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income $ 2,899 4,695
Adjustments to reconcile net income to net
cash provided by (used in) operating activities:
Depreciation and amortization 4,808 3,137
Provision for losses on accounts receivable 265 104
Deferred income taxes (1,162) 367
Change in assets and liabilities:
Accounts and notes receivable (4,033) (1,685)
Inventories (1,657) (2,106)
Prepaid expenses and other current assets 190 (327)
Accounts and notes payable -
trade and other current liabilities (79) 502
Income taxes payable 2,199 165
--------- ---------
Net cash provided by operating activities 3,430 4,852
--------- ---------
Cash flows from investing activities:
Capital expenditures (10,745) (3,714)
Other investing activities (177) 846
--------- ---------
Net cash used in investing activities (10,922) (2,868)
--------- ---------
Cash flows from financing activities:
Borrowings under line of credit arrangements 4,860 2,178
Payments under line of credit arrangements (1,101) (1,431)
Borrowings under revolving credit facility - 49,130
Payments under revolving credit facility - (45,710)
Stock issued 25 113
Other financing activities 170 (997)
--------- ---------
Net cash provided by financing activities 3,954 3,283
--------- ---------
Effects of exchange rate changes on cash 291 370
--------- ---------
Net increase (decrease) in cash (3,247) 5,637
Cash at beginning of year 14,872 2,117
--------- ---------
Cash at end of period $ 11,625 7,754
========= =========
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest $ 9,868 2,762
========= =========
Income taxes $ 3,101 3,535
========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
WORLDTEX, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
UNAUDITED
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 $1,384 and $9,438 for the six months
ended June 30, 1998 and 1997, respectively. Foreign currency translation
adjustments for the three months ended June 30, 1998 and 1997 were an increase
of $1,190 and a decrease of $3,029, respectively. No other comprehensive income
items were recorded by the Company in 1998 or 1997. Comprehensive income for the
six months and three months ended June 30, 1998 was $1,515 and $1,938,
respectively. Comprehensive loss for the six months and three months ended June
30, 1997 was $4,743 and $1,000, 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)
Consolidating Balance Sheet Information
June 30, 1998
Guarantor Non-Guarantor
Domestic Foreign
Worldtex, Inc. Subsidiaries Subsidiaries Eliminations Consolidated
-------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Assets
Current Assets
Cash $ 1,958 93 9,574 - 11,625
Accounts and notes receivable, net 182 23,182 26,227 - 49,591
Inventories - 30,116 25,264 - 55,380
Prepaid expenses and other current assets 1,587 199 757 - 2,543
--------- --------- --------- --------- ---------
Total current assets 3,727 53,590 61,822 - 119,139
Property, plant and equipment, net 201 49,893 55,090 - 105,184
Other assets 9,403 1,855 1,027 - 12,285
Cost in excess of net assets of acquired
businesses, net 56 63,617 17,711 - 81,384
Intercompany investments 106,363 - - (106,363) -
Intercompany advances 148,757 14,798 - (163,555) -
--------- --------- --------- --------- ---------
$ 268,507 183,753 135,650 (269,918) 317,992
========= ========= ========= ========= =========
Liabilities and Stockholders' Equity
Current Liabilities
Short-term borrowings $ - - 5,462 - 5,462
Current installments of long-term debt - - 578 - 578
Accounts and notes payable-trade and
other liabilities 2,557 10,948 14,258 - 27,763
Income taxes payable 1,219 (1,970) 2,666 - 1,915
--------- --------- --------- --------- ---------
Total current liabilities 3,776 8,978 22,964 - 35,718
Long-term debt 175,000 6,000 5,117 - 186,117
Other long-term liabilities - - 2,452 - 2,452
Deferred income taxes (4,108) 7,684 11,088 - 14,664
Intercompany payables 14,798 125,165 23,592 (163,555) -
--------- --------- --------- --------- ---------
Total liabilities 189,466 147,827 65,213 (163,555) 238,951
--------- --------- --------- --------- ---------
Stockholders' equity
Preferred stock - - - - -
Common stock 147 49 31,778 (31,827) 147
Paid-in capital 30,084 15,714 - (15,714) 30,084
Retained earnings 64,965 20,163 53,316 (73,479) 64,965
Accumulated other comprehensive income (14,657) - (14,657) 14,657 (14,657)
Less-Treasury stock, at cost (1,498) - - - (1,498)
--------- --------- --------- --------- ---------
Total stockholders' equity 79,041 35,926 70,437 (106,363) 79,041
--------- --------- --------- --------- ---------
$ 268,507 183,753 135,650 (269,918) 317,992
========= ========= ========= ========= =========
Notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
WORLDTEX, INC.
Note 3 - Supplemental Consolidating Financial Information
(Dollars in thousands)
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 - -
--------- --------- --------- --------- ---------
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)
Consolidating Statements of Income Information
Six Months Ended June 30, 1998
Guarantor Non-Guarantor
Domestic Foreign
Worldtex, Inc. Subsidiaries Subsidiaries Eliminations Consolidated
-------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net sales $ - 76,504 66,284 (7,505) 135,283
Cost of goods sold - 63,170 52,748 (7,505) 108,413
--------- --------- --------- --------- ---------
Gross profit - 13,334 13,536 - 26,870
Selling and administrative expense 1,758 6,226 5,098 - 13,082
--------- --------- --------- --------- ---------
Operating profit (loss) (1,758) 7,108 8,438 - 13,788
Interest expense 8,593 292 546 - 9,431
Intercompany interest expense (income) (4,618) 3,914 704 - -
Intercompany administrative charges (1,455) 954 501 - -
Other income (expense) - net 368 29 (52) - 345
--------- --------- --------- --------- ---------
Income before income taxes (3,910) 1,977 6,635 - 4,702
Provision for income taxes (1,201) 645 2,359 - 1,803
Undistributed earnings of subsidiaries 5,608 - - (5,608) -
--------- --------- --------- --------- ---------
Net income $ 2,899 1,332 4,276 (5,608) 2,899
========= ========= ========= ========= =========
</TABLE>
<TABLE>
<CAPTION>
Consolidating Statements of Income Information
Six Months Ended June 30, 1997
Guarantor Non-Guarantor
Domestic Foreign
Worldtex, Inc. Subsidiaries Subsidiaries Eliminations Consolidated
-------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net sales $ - 35,152 74,132 (6,486) 102,798
Cost of goods sold - 31,323 59,775 (6,486) 84,612
--------- --------- --------- --------- ---------
Gross profit - 3,829 14,357 - 18,186
Selling and administrative expense 1,234 1,660 5,160 - 8,054
--------- --------- --------- --------- ---------
Operating profit (loss) (1,234) 2,169 9,197 - 10,132
Interest expense 2,370 105 492 - 2,967
Intercompany interest expense (income) (1,313) 442 871 - -
Intercompany administrative charges (1,775) 958 817 - -
Other income (expense) - net 58 24 77 - 159
--------- --------- --------- --------- ---------
Income before income taxes (458) 688 7,094 - 7,324
Provision for income taxes (96) 237 2,488 - 2,629
Undistributed earnings of subsidiaries 5,057 - - (5,057) -
--------- --------- --------- --------- ---------
Net income $ 4,695 451 4,606 (5,057) 4,695
========= ========= ========= ========= =========
Notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
WORLDTEX, INC.
Note 3 - Supplemental Consolidating Financial Information
(Dollars in thousands)
Consolidating Statements of Income Information
Three Months Ended June 30, 1998
Guarantor Non-Guarantor
Domestic Foreign
Worldtex, Inc. Subsidiaries Subsidiaries Eliminations Consolidated
-------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net sales $ - 37,813 32,707 (4,466) 66,054
Cost of goods sold - 31,617 26,085 (4,466) 53,236
--------- --------- --------- --------- ---------
Gross profit - 6,196 6,622 - 12,818
Selling and administrative expense 1,029 3,031 2,625 - 6,685
--------- --------- --------- --------- ---------
Operating profit (loss) (1,029) 3,165 3,997 - 6,133
Interest expense 4,440 154 290 - 4,884
Intercompany interest expense (income) (2,379) 2,025 354 - -
Intercompany administrative charges (728) 477 251 - -
Other income (expense) - net 159 13 (63) - 109
--------- --------- --------- --------- ---------
Income before income taxes (2,203) 522 3,039 - 1,358
Provision for income taxes (626) 140 1,096 - 610
Undistributed earnings of subsidiaries 2,325 - - (2,325) -
--------- --------- --------- --------- ---------
Net income $ 748 382 1,943 (2,325) 748
========= ========= ========= ========= =========
</TABLE>
<TABLE>
<CAPTION>
Consolidating Statements of Income Information
Three Months Ended June 30, 1997
Guarantor Non-Guarantor
Domestic Foreign
Worldtex, Inc. Subsidiaries Subsidiaries Eliminations Consolidated
-------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net sales $ - 18,047 37,555 (3,722) 51,880
Cost of goods sold - 16,288 30,370 (3,722) 42,936
--------- --------- --------- --------- ---------
Gross profit - 1,759 7,185 - 8,944
Selling and administrative expense 708 891 2,675 - 4,274
--------- --------- --------- --------- ---------
Operating profit (loss) (708) 868 4,510 - 4,670
Interest expense 1,189 53 286 - 1,528
Intercompany interest expense (income) (633) 194 439 - -
Intercompany administrative charges (912) 492 420 - -
Other income (expense) - net 30 9 17 - 56
--------- --------- --------- --------- ---------
Income before income taxes (322) 138 3,382 - 3,198
Provision for income taxes (109) 83 1,195 - 1,169
Undistributed earnings of subsidiaries 2,242 - - (2,242) -
--------- --------- --------- --------- ---------
Net income $ 2,029 55 2,187 (2,242) 2,029
========= ========= ========= ========= =========
Notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
WORLDTEX, INC.
Note 3 - Supplemental Consolidating Financial Information
(Dollars in thousands)
Consolidating Statements of Cash Flows Information
Six Months Ended June 30, 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 $ 2,899 1,332 4,276 (5,608) 2,899
Adjustments to reconcile net income to net cash
provided by operating activities:
Undistributed earnings of subsidiaries (5,608) - - 5,608 -
Depreciation and amortization 17 2,732 2,059 - 4,808
Provision for losses on accounts receivables - 152 113 - 265
Deferred income taxes (2,220) 863 195 - (1,162)
Change in assets and liabilities net of effects
of acquisitions:
Accounts and notes receivable (181) (2,464) (1,388) - (4,033)
Inventories - (1,865) 208 - (1,657)
Prepaid expenses and other current assets (461) 311 340 - 190
Accounts and notes payable - Trade and other (1,043) 2,419 (1,455) - (79)
current liabilities
Income taxes payable 927 (185) 1,457 - 2,199
--------- --------- --------- --------- ---------
Net cash provided by (used in) operating
activities (5,670) 3,295 5,805 - 3,430
--------- --------- --------- --------- ---------
Cash flows from investing activities:
Capital expenditures 12 (4,752) (6,005) - (10,745)
Acquisitions, net of cash acquired 1,436 - - (1,436) -
Other investing activities 139 (358) (65) 107 (177)
--------- --------- --------- --------- ---------
Net cash used in investing activities 1,587 (5,110) (6,070) (1,329) (10,922)
--------- --------- --------- --------- ---------
Cash flows from financing activities:
Borrowings under line of credit arrangements - - 4,860 - 4,860
Payments under line of credit arrangements - - (1,101) - (1,101)
Borrowings under revolving credit facility - - - - -
Payments under revolving credit facility - - - - -
Borrowings under long term loans - - - - -
(Payments) under long term loans - - - - -
Stock issued or (reacquired), net 25 - - - 25
Advances - affiliated companies (2,593) 1,587 1,104 (98) -
Other financing activities (62) - 527 (295) 170
--------- --------- --------- --------- ---------
Net cash provided by (used in) financing
activities (2,630) 1,587 5,390 (393) 3,954
--------- --------- --------- --------- ---------
Effects of exchange rate changes in cash (1,387) - (44) 1,722 291
--------- --------- --------- --------- ---------
Net increase in cash (8,100) (228) 5,081 - (3,247)
Cash at beginning of year 10,058 321 4,493 - 14,872
--------- --------- --------- --------- ---------
Cash at end of period $ 1,958 93 9,574 - 11,625
========= ========= ========= ========= =========
Notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
WORLDTEX, INC.
Note 3 - Supplemental Consolidating Financial Information
(Dollars in thousands)
Consolidating Statements of Cash Flows Information
Six Months Ended June 30, 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 $ 4,695 451 4,606 (5,057) 4,695
Adjustments to reconcile net income to net cash
provided by operating activities:
Undistributed earnings of subsidiaries (5,057) - - 5,057 -
Depreciation and amortization 18 1,144 1,975 - 3,137
Provision for losses on accounts receivable - 10 94 - 104
Deferred income taxes 1,659 5 147 (1,444) 367
Change in assets and liabilities net of effects
of acquisitions:
Accounts and notes receivable (199) (1,243) (243) - (1,685)
Inventories - (993) (1,113) - (2,106)
Prepaid expenses and other current assets (306) 262 (283) - (327)
Accounts and notes payable - Trade and other 294 (108) 316 - 502
current liabilities
Income taxes payable 74 32 59 - 165
--------- --------- --------- --------- ---------
Net cash provided by (used in) operating
activities 1,178 (440) 5,558 (1,444) 4,852
--------- --------- --------- --------- ---------
Cash flows from investing activities:
Capital expenditures 1 (1,450) (2,265) - (3,714)
Acquisitions, net of cash acquired 9,438 - - (9,438) -
Other investing activities 63 783 - - 846
--------- --------- --------- --------- ---------
Net cash used in investing activities 9,502 (667) (2,265) (9,438) (2,868)
--------- --------- --------- --------- ---------
Cash flows from financing activities:
Borrowings under line of credit arrangements - - 2,178 - 2,178
Payments under line of credit arrangements - - (1,431) - (1,431)
Borrowings under revolving credit facility 49,130 - - - 49,130
Payments under revolving credit facility (45,710) - - - (45,710)
Borrowings under long term loans - - - - -
(Payments) under long term loans - - - - -
Stock issued or (reacquired), net 113 - - - 113
Advances - affiliated companies (2,978) 1,121 2,174 (317) -
Other financing activities (1,502) - (496) 1,001 (997)
--------- --------- --------- --------- ---------
Net cash provided by (used in) financing
activities (947) 1,121 2,425 684 3,283
--------- --------- --------- --------- ---------
Effects of exchange rate changes in cash (9,439) - (389) 10,198 370
--------- --------- --------- --------- ---------
Net increase in cash 294 14 5,329 - 5,637
Cash at beginning of year 428 174 1,515 - 2,117
--------- --------- --------- --------- ---------
Cash at end of period $ 722 188 6,844 - 7,754
========= ========= ========= ========= =========
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 six months ended June 30,1998 were $135.3 million and earnings
were $2.9 million compared with sales of $102.8 million and earnings of $4.7
million for the comparable period in 1997. Diluted income per share was $.20 for
the 1998 six month period compared with $.32 in 1997. Sales for the quarter
ended June 30, 1998 were $66.1 million and net income was $.7 million, compared
with sales of $51.9 million and net income of $2 million for the comparable 1997
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,
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales 100.0% 100.0% 100.0% 100.0%
------ ------ ------ ------
Gross margin 19.9% 17.7% 19.4% 17.2%
Selling and administration expense 9.7% 7.8% 10.1% 8.2%
------ ------ ------ ------
Operating profit 10.2% 9.9% 9.3% 9.0%
Interest expense 7.0% 2.9% 7.4% 2.9%
Other income - net .3% .1% .2% .1%
------ ------ ------ ------
Income before income taxes 3.5% 7.1% 2.1% 6.2%
====== ====== ====== ======
</TABLE>
For the six months ended June 30, 1998, sales increased by $32.5 million or
31.6% compared to the six months ended June 30, 1997. For the quarter ended June
30, 1998, sales increased by $14.2 million or 27.3% compared with the 1997
quarter.
Sales from North American operations increased 85.4% and 81.1% for the six
months and the three months ended June 30, 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 six months of 1998 were down 4.1% compared with the 1997 period, principally
due to overall weak demand by ladies' hosiery customers.
<PAGE>
WORLDTEX, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Sales from French operations decreased 15.1% and 18.4% for the six months and
the three months ended June 30, 1998 from the corresponding period in 1997. The
stronger U.S. dollar versus the French franc reduced the French subsidiary sales
by approximately 7.1% and 4.2% for the six months and the three months ended
June 30, 1998 (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 (including intercompany sales)
increased 9.0% and 6.3% for the six months and three months ended June 30, 1998
from the corresponding period in 1997. Such sales (excluding intercompany sales)
increased 3.2% and decreased 3.7% for the six and three months ended June 30,
1998 from the corresponding period in 1997. The reduced value of the Colombian
peso lowered South American sales by approximately 21.5% and 21.7% for the six
months and three months ended June 30, 1998 (assuming currency translation of
1998 sales at the rate applicable to 1997 results). Such results for South
America reflect the continuing efforts to expand production in the Company's
lower cost operation, including for purposes of resale by the Company's other
subsidiaries.
Gross profit margins increased to 19.9% in the 1998 six month period from 17.7%
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
9.7% from 7.8% for the six months ending June 30, 1998 compared with 1997
primarily because the fixed component of these expenses increased as a result of
the recent acquisitions.
Interest expense for the six months and three months ending June 30, 1998
increased from the corresponding periods in 1997 due to the $175 million
principal amount of the 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 38.3% for the six months ended
June 30, 1998 compared to 35.9% 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.
<PAGE>
WORLDTEX, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Cash totaled $11.6 million at June 30, 1998, representing a net decrease of $3.2
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 1998, $3.4 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 six months of 1998, financing activities contributed $4.0 million,
reflecting routine borrowings and repayments under the Company's credit
facilities. During the first six months of 1998, $10.9 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 1998 will approximate $14 million, primarily for the
purchase of equipment.
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 six months and three months
ended June 30, 1998 was $18.9 million and $8.7 million compared with $13.4
million and $6.3 million for the prior year periods. Depreciation and
amortization for the six and three months ended June 30, 1998 was $4.8 million
and $2.4 million compared with $3.1 million and $1.6 million in the prior year
periods.
Working capital was $83.4 million at June 30, 1998 and $87.7 million at December
31, 1997, reflecting a decrease of $4.3 million and current ratios of 3.3 and
3.9 respectively, at June 30, 1998 and December 31, 1997.
At June 30, 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 $14.8 million, $1.0 million, and $5.5 million, respectively, under
various bank lines of credit and overdraft facilities. At June 30, 1998, Filix,
Rubyco and Fibrexa had outstanding debt under these agreements of $0, $0 and
$5.5 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 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.
<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 14, 1998. At the
meeting, the following persons were elected as directors of the Company by the
votes indicated below:
Authority
Name For Withheld
- ---- --------- --------
Claude D. Egler 12,225,866 229,145
Richard J. Mackey 12,225,366 229,645
John K. Ziegler 12,225,865 229,146
In addition, the terms as directors of the Company of John B. Fraser, Salim M.
Ibrahim, Willi Roelli, Barry D. Setzer, and Michael B. Wilson continued after
the annual meeting.
Also submitted to a vote of the stockholders were certain amendments to the
Company's 1992 Stock Incentive Plan. These amendments were adopted by a vote of
8,493,445 shares for, 3,198,402 shares against, 43,162 shares abstaining and no
broker non-votes.
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits
Exhibit No. Description
11.1 Computation of earnings per share
27.1 Financial Data Schedule (filed with EDGAR only)
(b) Reports on Form 8-K
During the quarter ended June 30, 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: August 13, 1998 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,
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net income $ 2,899 4,695 748 2,029
=========== =========== =========== ===========
Shares:
Weighted average number
of shares outstanding 14,430,693 14,410,785 14,432,693 14,416,660
=========== =========== =========== ===========
Basic earnings per share (1) $ .20 .33 .05 .14
=========== =========== =========== ===========
Shares:
Weighted average number
of shares outstanding 14,430,693 14,410,785 14,432,693 14,416,660
Assumed exercise of options 327,246 424,745 301,975 323,783
----------- ----------- ----------- -----------
Total average number of common
and common equivalent shares
used for diluted computation 14,757,939 14,835,530 14,734,668 14,740,443
=========== =========== =========== ===========
Diluted earnings per share (2) $ .20 .32 .05 .14
=========== =========== =========== ===========
</TABLE>
(1) Basic earnings per share are calculated based upon the weighted average
number of common shares outstanding during the year.
(2) Diluted earnings per share are calculated based upon the weighted average
number of common shares and common equivalent shares outstanding during the
year.
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 JUNE 30, 1998 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-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 11,625
<SECURITIES> 0
<RECEIVABLES> 51,300
<ALLOWANCES> 1,708
<INVENTORY> 55,380
<CURRENT-ASSETS> 119,139
<PP&E> 145,247
<DEPRECIATION> 40,063
<TOTAL-ASSETS> 317,992
<CURRENT-LIABILITIES> 35,718
<BONDS> 186,117
0
0
<COMMON> 147
<OTHER-SE> 78,894
<TOTAL-LIABILITY-AND-EQUITY> 317,992
<SALES> 135,283
<TOTAL-REVENUES> 135,283
<CGS> 108,413
<TOTAL-COSTS> 108,413
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 265
<INTEREST-EXPENSE> 9,431
<INCOME-PRETAX> 4,702
<INCOME-TAX> 1,803
<INCOME-CONTINUING> 2,899
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,899
<EPS-BASIC> .20
<EPS-DILUTED> .20
</TABLE>
