UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended January 1, 1994
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from _________________ to ___________________
Commission file number 1-8016
------
TULTEX CORPORATION
(Exact name of registrant as specified in its charter)
Virginia 54-0367896
- - ------------------------------- --------------------------------------
(State or other jurisdiction of I.R.S. Employer Identification Number)
incorporation or organization)
100 Memorial Boulevard, P. O. Box 5191, Martinsville, Virginia 24115
- - ------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 703-632-2961
------------
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of exchange on which registered
Common Stock, $1 par value New York Stock Exchange
Preferred Stock Purchase Rights New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
------- -------
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K [ ]
State the aggregate market value of the voting stock held by non-affiliates
of the registrant:
$172,435,331 at March 14, 1994.
(APPLICABLE TO CORPORATE REGISTRANTS)
Indicate the number of shares outstanding of each of the issuer's classes
of common stock as of the latest practicable date.
29,794,698 shares of Common Stock, $1 par value, as of March 14, 1994
DOCUMENTS INCORPORATED BY REFERENCE
List hereunder the following documents if incorporated by reference and the
Part of the Form 10-K into which the document is incorporated:
1. Those portions of the Proxy Statement for the company's on 1994
Annual Meeting of Stockholders ("1994 Proxy Statement") incorporated
herein by reference in Part III, Items 10, 11, 12 and 13. Such proxy
statement is to be filed with the Securities and Exchange Commission not
later than 120 days after January 1, 1994.
1
PART I
Item 1. Business
Tultex Corporation is a Virginia corporation engaged principally in the
business of manufacturing and selling textile products. The company is a
vertically integrated producer of fleece and jersey activewear and leisure
time apparel. It operates apparel plants in Virginia, North Carolina,
Indiana, Massachusetts and Jamaica, and yarn plants in North Carolina.
The principal products of the company are knitwear items of various kinds for
work and casual wear such as sweatshirts, jogging suits, hooded jackets,
headwear and T-shirts. The company manufactures apparel products under
Tultex (Registered Trademark), Tultex Maximum Sweats (Registered Trademark),
Tultex Super Weights (Registered Trademark), Discus Athletic (Registered
Trademark), Universal (Registered Trademark), Logo 7 (Registered Trademark),
Logo Athletic (Registered Trademark) and Competitor (Registered Trademark)
brand labels and private labels. In 1991, the company was licensed to
manufacture and market adult fleecewear under the Brittania (Registered
Trademark) label owned by Levi Strauss & Co. These products are distributed
at wholesale through company sales offices and manufacturers' representatives
throughout the United States and abroad, primarily to discount and chain
stores, mail houses, screenprinters and contract customers. The total
revenues of the company were $533,611,000 in 1993, $503,946,000 in 1992 and
$349,910,000 in 1991. In 1993, sales in the last half of the year were 64%
compared to 68% and 71% in the last half of 1992 and 1991, respectively.
The company has over 4,400 customers. No single customer accounted for 10%
of consolidated net sales in fiscal 1993. Total sales to the five largest
customers were $186,253,000 in 1993, $175,581,000 in 1992 and $121,555,000
in 1991.
The company's products are manufactured in 12 plants in Virginia and North
Carolina, one plant in Indiana, one plant in Massachusetts and one plant in
Jamaica, operated by the company's wholly-owned subsidiary, AKOM, Ltd., a
Cayman Islands, B.W.I corporation. The company also operates a maquiladora
sewing operation in Mexico. These products are marketed by the company
through its national sales organization and designated sales representatives.
The Customer Service Center has centralized the storage of most nondecorated
garments and provides a means of automatic storage and retrieval, supporting
packing and shipping operations, resulting in improved inventory management
and customer service. Currently the company stores goods in 6 warehouses.
The company's traditional business is to market fleece and jersey knit
activewear with an emphasis on sales of basic style garments in high-volume
markets. The company's marketing methods are typical of producers of basic
clothing products. Its merchandising department keeps abreast of current
fashionable styles and colors. After internal reviews by manufacturing
departments, selected customers preview and comment upon prototype garments
before the merchandising department determines those to be presented in sales
catalogs. Production is planned on orders received and anticipated customer
orders for these garments.
2
The company is a major manufacturer and marketer of fleeced knitwear and a
significant competitor in this market, although its exact competitive position
is unknown. While management estimates that there are five major domestic
competitors in the fleeced knit activewear segment of the apparel industry, the
company's products compete with all clothing which is used for the same general
purposes by the consumer. Competition from both domestic and foreign apparel
manufacturers is intense and, although brand awareness by the consumer appears
to be developing in importance, price remains the principal competitive factor.
The 1992 acquisitions of Logo 7 and Universal Industries, now a part of Logo 7,
have made the company a major competitor in the licensed sports apparel
business, one of the fastest growing portions of the apparel industry. Logo 7
decorates garments using silkscreening or embroidery and markets decorated
headwear. Logo 7 is a licensee of the National Football League, National
Basketball Association, National Hockey League and Major League Baseball for
the manufacturing and marketing of certain apparel products bearing logos of
teams that are a part of those organizations.
Logo 7's apparel product lines include T-shirts, golf shirts and sweaters,
basic fleece products, shorts, fashion fleece, jerseys, wind suits, and
jackets. Most items are sold in a relatively broad range of colors, due to
requirements to match the relevant team colors. In the silkscreening process,
Logo 7 uses automatic silkscreen machines and dryers for longer runs and
hand-operated presses for shorter or more complicated runs. The embroidery is
carried out using high-speed, computerized Tajima stitching equipment.
Generally production is tied to specific orders, although during the slower
times of the year, some production is devoted to restocking small quantities
of finished items which Logo 7 keeps in its inventory. The completed garments
are folded and packed by hand and are typically dispatched within 24 hours.
Logo 7 also decorates, designs and markets headwear to sporting goods stores
and major retailers throughout the United States. Logo 7 obtains 80% of its
headwear product line from the Far East with the remainder sourced
domestically. The company maintains non-exclusive domestic licenses with
professional sports organizations and major colleges for the right to use
team logos and graphics. In addition, Logo 7 maintains several
"toy/character/entertainment" licenses and numerous corporate licenses. The
company also markets nondecorated hats to team dealers and children's
headwear.
The company's yarn operations produce cotton and cotton-synthetic blended
yarns of various counts. The yarn produced is principally consumed internally
by the company's apparel operation.
The company's facilities for manufacturing have adequate capacity to support
the annual sales growth objective for 1994. The current nondecorated order
backlog was estimated at approximately $57,000,000 at the end of 1993, a
decrease of approximately $29,000,000 from the end of the prior year.
Backlogs were computed from orders on hand at the last day of each fiscal
year. Management cautions that due to the typical second-half seasonality of
the activewear business, year-end order backlogs are not a reliable indicator
of sales volume for the coming year. Additionally, customers are now ordering
closer to the retail selling season than in the past to shorten lead times
and minimize inventory risk.
3
The company attempts to minimize the seasonal sales effects on manufacturing
operations by producing a portion of its fall line in spring and summer for
sales in the following fall and winter months. The outerwear T-shirts line
introduced in 1990 and the addition of headwear through the acquisition of
Universal Industries in 1992 are intended to promote additional first-half
shipments of the company products.
The principal raw materials are cotton and synthetic fibers, dyes and
chemicals. Approximately 9% of the spun yarns in our apparel products is
purchased from yarn vendors. These yarns and the dyes and chemicals are
purchased at competitive prices from numerous suppliers.
Dominion Stores, Inc., a wholly-owned subsidiary, operates fourteen retail
stores in North Carolina, Virginia and West Virginia, which sell surplus
company apparel and apparel items of other manufacturers, and thirty-three
retail stores in twenty-one states which sell first quality company-made
products and accessory items.
Tultex Canada, Inc. is a subsidiary that commenced operation in 1990 as part
of the company's initial expansion into international markets. In 1992, an
agreement was also signed with Nissan Trading Co., Ltd., a subsidiary of
Nissan Motor Co., to market and sell Tultex products in Japan. While
international sales were immaterial in 1993, both of these ventures
experienced strong double digit sales growth over the prior year.
General
Expenditures for research and development in fiscal 1993 were insignificant.
Approximately 7,000 persons are employed by the company. No Tultex employees
are represented by a labor union.
The company, along with other apparel manufacturers in the area, returns
dyeing wastes for treatment to the City of Martinsville's municipal effluent
systems. These treated dyeing wastes do not pose environmental risks. In
1989, the city adopted a plan for removing the coloration, caused by the dye
wastes, from the water by using polymer chemicals to combine with the
extremely small particles of the dye to create a sludge-like substance that
can be retrieved from the water at the city's wastewater treatment plant. To
cover the cost to the city, each company pays 50 to 80 cents per thousand
gallons of water above regular water costs for its portion of the expense.
The expenditures required do not have a material effect on the company's
earnings or competitive position.
Executive Officers of the Company
Pursuant to General Instruction G to Form 10-K, the following information is
furnished concerning the executive officers of the company.
Name Office Age
- - ----------------- --------------------------------------------- ---
J. M. Franck Chairman and Chief Executive Officer 41
C. W. Davies, Jr. President and Chief Operating Officer 45
J. J. Smith Vice President - Customer Service 51
4
B. A. Ratliff Vice President - Service/Quality 48
D. P. Shook Vice President - Human and Financial Services 56
W. J. Caruba Vice President - Sales & Marketing 46
S. H. Wood Controller 34
J. M. Baker Secretary - Treasurer 63
Mr. J. M. Franck became Chairman of the Board of Directors and Chief Executive
Officer in January 1991. He had served as President and Chief Operating
Officer of the company since December 1988 and as Vice President since January
1983. He has been on the Board of Directors since 1984.
Mr. Davies became President and Chief Operating Officer in January 1991 after
serving as Executive Vice President since December 1989. From February 1988
through November 1989, he was President and Chief Executive Officer of Signal
Apparel Company in Chattanooga, Tennessee. From March 1986 to February 1988,
Mr. Davies was President of Little Cotton Manufacturing Company in Wadesboro,
North Carolina, and from December 1984 through February 1986 was Senior Vice
President of Fieldcrest-Cannon in Kannapolis, North Carolina. He has been on
the Board of Directors since August 1990.
Mr. Smith became Vice President - Customer Service in September 1992. He
served as Vice President - Marketing from December 1987 after serving as
Director - Corporate Planning since May 1987. He was Manager - Information
Systems & Services between December 1985 and May 1987.
Mr. Ratliff became Vice President - Service/Quality in April 1993 after
serving as Vice President - Operations since December 1984.
Mr. Shook became Vice President - Human and Financial Services in January
1994. He served as Vice President - Finance and Administration from December
1988 after serving as Vice President - Finance from January 1987 and was
Controller from December 1985 until that time.
Mr. Caruba became Vice President - Marketing in September 1992. He served as
Vice President - Distribution from October 1990 after serving as General
Manager - Planning from November 1989 to October 1990 and was Director -
Production Control from December 1985 to November 1989.
Ms. Wood became Controller in October 1993 after serving as Team Tultex
Controller since June 1993. In the ten years prior to joining the company,
she was employed by Price Waterhouse in progressive audit positions
culminating as Audit Senior Manager.
Mr. Baker became Secretary - Treasurer in January 1991 after serving as
Director - External Reporting since August 1987. Between December 1985 and
August 1987 he was Director - Budgets and Financial Reporting.
All terms of office will expire concurrently with the meeting of directors
following the next annual meeting of stockholders at which the directors are
elected.
5
Item 2. Properties
All facilities are of masonry construction except the buildings at Vinton,
Virginia, Mattapoisett, Massachusetts and the Customer Service Center in
Martinsville, Virginia, which are steel-framed metal-walled buildings
constructed on a concrete slab. All buildings are well-maintained. The
following table presents information relating to owned facilities.
Date of
Construction
or Most Recent Square
Renovation Location Footage Use
- - -------------- ---------------- --------- ---------------------------
1977-85 Martinsville, VA 45,200 Administrative offices
1963-87 Martinsville, VA 1,100,000 Manufacturing (apparel)
and executive offices
1920 Koehler, VA 60,000 Warehousing
1965 Martinsville, VA 70,000 Warehousing
1967 South Boston, VA 130,000 Sewing (apparel)
1970 Bastian, VA 53,500 Sewing (apparel)
1907-1979 Longhurst, NC 287,000 Manufacturing (yarn)
1899-1981 Roxboro, NC 110,000 Manufacturing (yarn)
1973-1977 Rockingham, NC 60,100 Manufacturing (yarn)
1952 Dobson, NC 38,000 Manufacturing (apparel)
1966-1983 Mayodan, NC 612,000 Manufacturing, warehousing
and shipping (apparel)
1988 Vinton, VA 50,000 Manufacturing (apparel)
1989 Martinsville, VA 502,200 Warehousing and shipping
(apparel)
1985 Mattapoisett, MA 116,250 Manufacturing (apparel)
6
The following table presents information relating to leased facilities.
Date of
Construction Lease
or Most Expira- Current
Recent Square tion Annual
Renovation Location Footage Date Rental Use
- - ------------ ---------------- ------- -------- ------- -------------
1969 Chilhowie, VA 40,015 08/31/97 $46,200 Manufacturing
(apparel)
1984 Montego Bay, 66,000 Monthly 266,040 Manufacturing
Jamaica (apparel)
1960 Marion, NC 48,760 11/02/98 95,000 Manufacturing
(apparel)
1982 Martinsville, VA 31,000 Monthly 18,700 Warehousing
(apparel)
1963 Martinsville, VA 125,000 06/30/94 235,200 Warehousing
(apparel)
1990 Martinsville, VA 48,000 03/31/96 146,880 Manufacturing
(apparel)
1992 Indianapolis, IN 650,000 04/30/97 1,404,000 Manufacturing
(apparel)
Company sales offices are leased in New York City, Boston, Chicago, Seattle
and Los Angeles, at aggregate annual rentals of approximately $259,000.
Dominion Stores, Inc. leases retail outlet stores in Virginia, North Carolina,
Michigan, New York, California, Pennsylvania, Washington, Wisconsin, Ohio,
West Virginia, Indiana, Maryland, Maine, Connecticut, New Hampshire, Kentucky,
Tennessee, Florida, Minnesota, Oregon and Idaho at aggregate annual rentals of
approximately $2,525,000.
All of the properties listed in the tables of owned and leased facilities are
fully utilized by the company or its subsidiaries.
Manufacturing equipment, substantially all of which is owned by the company,
includes carding, spinning and knitting machines, jet-dye machinery, dryers,
cloth-finishing machines, cutting and sewing equipment, embroidery equipment,
screen printing machines and automated storage/retrieval equipment. This
machinery is modern and kept in good repair. In addition, the company leases
a fleet of trucks and tractor-trailers which are used for transportation of
raw materials and for interplant transportation of semi-finished and finished
products.
The company's facilities and its manufacturing equipment are considered
adequate for its immediate needs.
Item 3. Legal Proceedings.
None.
7
Item 4. Submission of Matters to a Vote of Security Holders.
None.
PART II
Item 5. Market for Registrant's Common Stock and Related Stockholder Matters.
As of March 14, 1994 there were 3,479 record holders of the Company's common
stock. Other information required by Item 5 of Form 10-K appears under the
heading "Common Stock Prices and Dividend Information" on page 32 and in
"Note 7" of "Notes to Financial Statements" on page 23 of the company's 1993
Annual Report to Stockholders and is incorporated herein by reference.
Item 6. Selected Financial Data.
The following table presents selected finanical date of Tultex Corporation.
This historical data should be read in conjunction with the Consolidated
Financial Statements and the related notes thereto in Item 8 and "Management's
Discussion and Analysis of Financial Condition and Results of Operations" in
Item 7.Prior years have been restated to reflect the acquisition of Universal
Industries, Inc. treated as a pooling of interests, and to reflect a change in
accounting method from LIFO to FIFO.
1993 1992 1991 1990 1989
(In thousands of dollars except per share data) (52 weeks) (53 weeks) (52 weeks) (52 weeks) (52 weeks)
---------- ---------- ---------- ---------- ----------
Summary of Operations:
Net sales and other income $ 533,611 $ 503,946 $ 349,910 $ 390,336 $ 361,721
Costs and operating expenses 507,524 470,155 330,079 351,228 340,031
---------- ---------- ---------- ---------- ----------
Operating income 26,087 33,791 19,831 39,108 21,690
Interest expense 16,996 13,540 9,064 8,838 8,274
---------- ---------- ---------- ---------- ----------
Income before income taxes and cumulative effect
of a change in accounting principle 9,091 20,251 10,767 30,270 13,416
Provision for income taxes 3,188 7,060 3,443 11,097 4,701
---------- ---------- ---------- ---------- ----------
Income before cumulative effect of a
change in accounting principle 5,903 13,191 7,324 19,173 8,715
Cumulative effect of a change in
accounting principle (Note 9) -- -- 2,848 -- --
---------- ---------- ---------- ---------- ----------
Net income 5,903 13,191 10,172 19,173 8,715
Less preferred dividend requirement 1,135 1,041 10 13 26
---------- ---------- ---------- ---------- ----------
Balance to common stock $ 4,768 $ 12,150 $ 10,162 $ 19,160 $ 8,689
========== ========== ========== ========== ==========
Weighted average number of common
shares outstanding* 28,961 28,872 28,862 28,901 28,882
========== ========== ========== ========== ==========
Shares outstanding at year end* 29,053 28,878 28,862 28,860 28,895
========== ========== ========== ========== ==========
8
1993 1992 1991
(In thousands of dollars except per share data) (52 weeks) (53 weeks) (52 weeks) (52 weeks) (52 weeks)
---------- ---------- ---------- ---------- ----------
Per common share*:
Income before cumulative effect of a
change in accounting principle $ .16 $ .42 $ .25 $ .66 $ .30
Net income $ .16 $ .42 $ .35 $ .66 $ .30
========== ========== ========== ========== ==========
Dividends declared (Note 7) $ .20 $ .20 $ .32 $ .36 $ .36
========== ========== ========== ========== ==========
Book value $ 5.64 $ 5.67 $ 5.44 $ 5.37 $ 4.96
========== ========== ========== ========== ==========
Year-End Data:
Current assets $ 288,691 $ 249,327 $ 171,692 $ 176,611 $ 177,837
Current liabilities 45,138 122,610 86,681 84,179 81,552
---------- ---------- ---------- ---------- ----------
Working capital $ 243,553 $ 126,717 $ 85,011 $ 92,432 $ 96,285
========== ========== ========== ========== ==========
Inventories $ 157,278 $ 130,166 $ 89,368 $ 98,748 $ 103,765
Property, plant and equipment (net) 151,775 153,188 140,426 150,372 143,558
Total assets 474,965 435,818 314,957 328,643 323,778
Bank notes payable -- 79,825 55,762 43,299 49,239
Current portion of long-term debt 8,524 2,268 2,443 3,812 2,582
========== ========== ========== ========== ==========
Capital Invested:
Long-term debt $ 230,914 $ 118,438 $ 56,827 $ 75,958 $ 79,312
Stockholders' equity 179,197 178,793 157,091 155,301 143,864
---------- ---------- ---------- ---------- ----------
Total capital invested $ 410,111 $ 297,231 $ 213,918 $ 231,259 $ 223,176
========== ========== ========== ========== ==========
Return on average total capital invested 1.7% 5.2% 4.6% 8.4% 4.3%
Long-term debt as a percentage of total capital 56.3% 39.8% 26.6% 32.8% 35.5%
========== ========== ========== ========== ==========
*As adjusted for stock splits, stock dividends and shares issued in pooling-
of-interests acquisition of Universal Industries, Inc.
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Results of Operations
The financial results for the first six months of 1992 and all prior periods
presented have been restated to include Universal Industries, Inc., acquired
by Tultex in June 1992 through an exchange of stock accounted for as a pooling
ofinterests. In addition, the company changed its method of determining cost
of inventories from the last-in, first-out (LIFO) method to the first-in,
first-out (FIFO) method during the fourth quarter of 1993. This change has
been applied by retroactively restating all prior periods presented. The
following table presents the company's consolidated income statement items as
a percentage of sales.
9
Percentage of Net Sales
-------------------------------------------------
Jan. 1, 1994 Jan. 2, 1993 Dec. 28, 1991
(52 weeks) (53 weeks) (52 weeks)
------------ ------------ -------------
Net sales and
other income 100.0% 100.0% 100.0%
------------ ------------ -------------
Cost of
products sold 74.1 73.0 77.5
Depreciation 4.4 4.2 5.0
Selling, general
and administrative 16.6 16.1 13.0
Loss (gain) on
sale of assets - - (1.2)
Interest 3.2 2.7 2.6
------------ ------------ -------------
Total costs and
expenses 98.3 96.0 96.9
------------ ------------ -------------
Income before taxes 1.7 4.0 3.1
Income taxes .6 1.4 .2*
------------ ------------ -------------
Net income 1.1% 2.6% 2.9%
------------ ------------ -------------
*Includes the cumulative effect recognition of SFAS No.96 "Accounting for
Income Taxes" adopted as of first quarter 1991.
Net sales and other income for the year ended January 1,1994, increased $30
million or 6% from 1992 which increased $154 million or 44% from 1991. The
1993 sales growth was due to a 24% increase in sales of the company's Logo 7
subsidiary partially offset by lower nondecorated apparel sales. The 1992
sales increase was primarily due to sales of Logo 7 which was acquired by the
company as of January 1, 1992. Unit sales volume of nondecorated apparel in
1993 was relatively unchanged from prior year levels, while the average
selling price decreased 2%. The 1993 average price decline of nondecorated
products was primarily due to proportionately higher shipping volume of jersey
products which sell at lower prices than fleece garments. Unit sales volume
and average pricing in 1992 each increased 3% from 1991.
The company's nondecorated apparel order backlog at January 1, 1994 was $57
million versus $86 million at January 2, 1993. This 34% decrease reflects a
significant decline in demand for activewear in the latter half of 1993 that
is expected to continue through the first six months of 1994. This decrease
in demand has resulted in higher manufacturer inventories compared to last
year. The company currently plans to operate reduced work schedules to better
align inventories with demand. The combination of lower sales and increased
product costs due to lower production volume are expected to negatively impact
net income for the first six months of 1994 compared to the first half of
1993.
10
Costs of products sold as a percentage of sales increased from 73% for fiscal
year 1992 to 74% for 1993. The increase in cost of products sold as a
percentage of sales was primarily due to heavier fabric weights, greater
sewing detail for nondecorated products, strong decorated apparel sales
growth with mass merchandisers which generally yield lower margins, and
expenses associated with streamlining operations. The increase in jersey
sales, which traditionally yield lower margins than fleece, has also increased
cost of products sold as a percentage of sales. Total apparel production for
1993 decreased 3% from the comparable period of 1992. The company expects a
significant increase in raw cotton prices during 1994 due to lower than
anticipated cotton yields.
Depreciation as a percentage of net sales was 4% for 1993 and 1992.
Depreciation expense in 1993 increased 12% over last year, and in 1992
depreciation grew 20% over 1991. The 1993 increase was primarily due to
expenditures for machinery and equipment.
Selling, general and administrative (S,G&A) expenses increased as a percentage
of sales from 16% in 1992 to 17% in 1993. S,G&A expenses in 1993 increased $7
million or 9% compared to 1992. The primary reason for the S,G&A increase was
a $5 million increase in royalty expenses related to higher sales of
professional sports licensed apparel. In 1992, S,G&A expenses increased $36
million or 79% compared to 1991. This increase was generated by the effect of
the aforementioned acquisition of Logo 7 and increased advertising expense
due to promotion of the Tultex and Discus Athletic brands.
Interest expense was 3% of sales for 1993 and 1992. Interest expense was $17
million for 1993 compared to $14 million for 1992. The increase was primarily
the result of higher debt due to increased working capital needs and the
acquisition of Logo 7. The company has experienced increased working capital
needs due to higher inventory levels and extended payment terms for our
customers.
The provision for income taxes is a function of pretax earnings and the
combined effective rate of federal and state income taxes. The effective rate
for combined federal and state income tax was 35% in 1993, 35% in 1992 and
32% in 1991. The lower rate for 1991 was the result of permanent differences
between book and tax income and their increased percentage relationship to
relatively low pretax earnings.
Sales for Logo 7 for 1993 increased 24% from the previous year. Logo 7
manufactures and markets decorated activewear encompassing a broad range of
products, such as T-shirts, fleecewear, jackets, windsuits and headwear. Logo
7 offers these screenprinted and embroidered apparel items under licenses from
all major professional sports, colleges and certain entertainment industries.
Since Logo 7 is primarily positioned in the licensed sports apparel business,
a portion of the success of the company is tied to the fortunes of sports
teams. In 1993, the Dallas Cowboys victory in the Superbowl and the Chicago
Bulls again winning the NBA Championship were positive factors in the annual
financial performance. Troy Aikman of the Dallas Cowboys is a representative
for our Logo Athletic branded products. Logo 7 is adding National Basketball
Association rookie Chris Webber and National Hockey League All-Star Chris
Chelios as representatives to broaden appeal of the Logo Athletic brand. Logo
7 is introducing the Driver's Club for NASCAR racing fans in 1994 and has
obtained the license rights to 1994 World Cup Soccer played at various venues
in the United States, as well as rights to the 1996 Summer Olympic Games to
be held in Atlanta.
11
The company foresees significantly higher sales volume of nondecorated jersey
products during 1994 through improved utilization of existing capacity.
Increased jersey manufacturing capacity is enabling the company for the first
time in 1994 to offer this product to major retail accounts. Increased sales
are also expected for the company's upscale Discus Athletic brand as a result
of aggressive marketing in the department store and specialty shop channels.
The Discus Athletic brand of fleece and T-shirts is a sponsor of Men's
Atlantic Coast Conference Basketball for 1994 through 1996. Discus Athletic
commercials will be shown during every regular season game, as well as the
conference tournament. The company's basic nondecorated fleece product sales
were disappointing for 1993 and shipment volume is expected to be relatively
flat in 1994. Efforts to reduce seasonality are somewhat encouraging due to
continued growth of jersey products, headwear and windsuits. Despite this
improvement, 1994 is expected to follow the same general pattern of quarterly
sales and earnings as evidenced in past years due to the seasonal nature of
fleece products. The company is cautious concerning 1994. Competition in the
industry is intense with price decreases anticipated due to higher
manufacturer inventory levels compared to last year throughout the industry.
The company's operating schedules and financial performance for the first six
months of 1994 will be negatively impacted until these inventory levels are
reduced to more conventional levels.
The company continues to seek ways to lower costs, increase efficiency and
improve product quality. Strategic Process Management teams have been formed
to review critical processes in the company and pinpoint probable
opportunities for significant improvement. This ongoing program is expected to
result in initial cost reductions during 1994. In addition, the company has
begun streamlining operations which will result in reduced labor and related
benefit expenses during 1994. These cost reduction efforts will help offset
pricing pressures from current competitive conditions during 1994.
Financial Condition, Liquidity and Capital Resources
Net working capital at January 1, 1994 increased $117 million from year-end
1992, as inventories and accounts receivable increased and working capital
debt was moved from current liabilities to long-term debt due to replacement
of the company's short-term bank lines with a $225 million, two-year revolving
credit facility.
Due to the seasonality of fleecewear shipments, receivables normally peak in
September and October and begin to decline in December as shipment volume
decreases and cash is collected. Accounts receivable increased $7 million
from January 2, 1993 to January 1, 1994. The average number of days' sales in
receivables was 77 for 1993 compared to 73 for 1992. This increase was due to
the aforementioned extended terms taken by our customers.
Inventories increased $27 million compared to year-end 1992 as a result of
lower than expected sales unit volume due to the industry downturn. The
average days' sales in inventory on hand at year-end 1993 increased 13% from
January 2, 1993; and at year-end 1992, the average number of days' sales in
inventory on hand increased 21% from December 28, 1991. The current ratio at
year-end was 6.4, 2.0 and 2.0 for 1993, 1992 and 1991, respectively. The 1993
increase was the result of the aforementioned revolving credit facility which
is classified as long-term debt.
12
On October 6, 1993, the company entered into a $225 million revolving credit
facility which replaced its short-term credit lines. This agreement, which
has a two-year maturity with three annual options to renew, provides for the
company's working capital needs. Average borrowings under this facility
during the fourth quarter were $167 million at an average annual rate of
3.9%. The highest single day balance reached during the quarter was $190
million. Outstanding letters of credit under this facility at January 1, 1994
were $10 million. Long-term debt at January 1,1994 increased $112 million
compared to year-end 1992 due to $121 million outstanding under the revolving
credit facility partially offset by reclasses to current portion of long-term
debt and regularly scheduled payments. At year end, the company had obtained
waivers for one loan covenant violation with several lenders. The company
has obtained amendments for certain loan covenants for 1994. These amendments
will provide for greater flexibility during the current period of decreased
demand.
At January 1, 1994, there were no notes payable to banks under short-term
lines of credit. At January 2, 1993, the comparable amount was $80 million.
The decrease was due to the company's aforementioned revolving credit
facility. Short-term borrowings outstanding averaged $92 million, $81 million
and $68 million for 1993, 1992 and 1991, respectively, at average annual
interest rates of 3.7%, 4.4% and 6.4%. The highest single-day balance reached
each year was $186 million in 1993, $114 million in 1992 and $107 million in
1991. In 1993, net cash used by operating activities of $6 million primarily
related to a $27 million increase in inventories and a $7 million increase in
accounts receivable partially offset by depreciation of $23 million and net
income of $6 million. Cash used by investing activities of $24 million was
primarily used to finance additions to fixed assets. Cash provided by
financing activities of $33 million was derived principally from increased
long-term debt of $121 million partially offset by an $80 million reduction
in short-term debt. Planned capital expenditures for 1994 are $14 million.
The company expects annual cash flows from income and non-cash items,
supplemented by the new revolving credit facility, to support its seasonal
working capital requirements in 1994.
Stockholders' equity was $179 million at year-end 1993, $179 million at
year-end 1992 and $157 million at year-end 1991. Stockholders' equity remained
relatively constant from January 2, 1993 to January 1, 1994 since net income
of $6 million and proceeds from the exercise of stock options of $1 million
were offset by cash dividends declared of $7 million. The return on average
stockholders' equity was 3% in 1993, 8% in 1992 and 7% in 1991.
Item 8. Financial Statements and Supplementary Data.
TULTEX CORPORATION
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page
----
Consolidated statements of Income 13
Consolidated Balance Sheets 15
Consolidated Statements of Cash Flows 17
Consolidated Statements of Changes in Stockholders' Equity 19
Notes to Consolidated Finanical Statements 20
Report of Independent Public Accountants 36
13
Tultex Corporation
Consolidated Statements of Income
(In thousands of dollars excepts per share data)
37
Fiscal years ended: Jan. 1, 1994 Jan. 2, 1993 Dec. 28, 1991
(52 weeks) (53 weeks) (52 weeks)
------------ ------------ -------------
Net sales and other income $ 533,611 $ 503,946 $ 349,910
------------ ------------ -------------
Cost and expenses:
Cost of products sold 395,727 368,027 271,243
Depreciation 23,364 20,831 17,369
Selling, general and
administrative 88,433 81,297 45,481
Gain on sale of facilities -- -- (4,014)
Interest 16,996 13,540 9,064
------------- ------------ -------------
Total costs and expenses 524,520 483,695 339,143
------------ ------------ -------------
Income before income taxes
and cumulative effect of a
change in accounting principle 9,091 20,251 10,767
Provision for income taxes
(Note 9) 3,188 7,060 3,443
------------ ------------ -------------
Income before cumulative
effect of a change in
accounting principle 5,903 13,191 7,324
Cumulative effect of a change
in accounting principle
(Note 9) -- -- 2,848
------------ ------------ -------------
Net Income $ 5,903 $ 13,191 $ 10,172
------------ ------------ -------------
14
Fiscal years ended: Jan. 1, 1994 Jan. 2, 1993 Dec. 28, 1991
(52 weeks) (53 weeks) (52 weeks)
------------ ------------ -------------
Earnings per share:
Income before cumulative
effect of a change in
accounting principle $ .16 $ .42 $ .25
Cumulative effect of a
change in accounting
principle (Note 9) -- -- .10
------------ ------------ -------------
Net Income per Common Share $ .16 $ .42 $ .35
------------ ------------ -------------
Dividends per Common Share
(Note 7) $ .20 $ .20 $ .32
------------ ------------ -------------
The accompanying Notes to Financial Statements are an integral part of this
statement.
15
Tultex Corporation
Consolidated Balance Sheets
(In thousands of dollars except share data)
Assets Jan. 1, 1994 Jan. 2, 1993
------------ ------------
Current assets:
Cash and equivalents (Note 5) $ 6,754 $ 3,603
Accounts receivable, less allowance
for doubtful accounts and returns of
$2,374 (1993) and $2,360 (1992) 116,383 109,880
Inventories (Note 3) 157,278 130,166
Prepaid Expenses 8,276 5,678
------------ ------------
Total current assets 288,691 249,327
------------ ------------
Property, plant and equipment,
net of depreciation (Note 4) 151,775 153,188
Intangible assets 27,983 29,200
Other assets 6,516 4,103
------------ ------------
Total Assets $ 474,965 $ 435,818
============ ===========
16
Liabilities and Stockholders' Equity Jan. 1, 1994 Jan. 2, 1993
------------ ------------
Current liabilities:
Notes payable to banks (Note 5) $ -- $ 79,825
Current maturities of long-term debt
(Note 6) 8,524 2,268
Accounts payable-trade 18,170 16,977
Accrued liabilities-other 13,923 15,914
Dividends payable (Note 7) 1,736 1,728
Income taxes payable 2,785 5,898
------------ ------------
Total current liabilities 45,138 122,610
------------- ------------
Long-term debt, less current maturities
(Note 6) 230,914 118,438
------------ ------------
Deferrals:
Deferred income taxes (Note 9) 14,014 12,134
Other 5,702 3,843
------------ -------------
Total deferrals 19,716 15,977
------------ ------------
Stockholders' equity (Notes 6, 8, 15 and 16):
5% cumulative preferred stock, $100 par value;
authorized-22,000 shares, issued and
outstanding-1,975 shares (1993 and 1992) 198 198
Series B, $7.50 cumulative convertible preferred
stock; issued and outstanding-150,000 shares
(1993 and 1992) 15,000 15,000
Common stock, $1 par value; authorized-
60,000,000 shares, issued and outstanding-
29,053,126 shares (1993) and 28,877,526
shares (1992) 29,053 28,878
Capital in excess of par value 1,889 681
Retained earnings 133,107 134,136
------------ ------------
179,247 178,893
Less notes receivable from stockholders 50 100
------------ ------------
Total stockholders' equity 179,197 178,793
Commitments and contingencies
(Notes 12, 13 and 14)
Total Liabilities and Stockholders'
Equity $ 474,965 $ 435,818
============ ============
The accompanying Notes to Financial Statements are an integral part of this
statement.
17
Tultex Corporation
Consolidated Statements of Cash Flows
(In thousands of dollars)
Fiscal years ended Jan. 1, 1994 Jan. 2, 1993 Dec. 28, 1991
(52 weeks) (53 weeks) (52 weeks)
------------ ------------ -------------
Operating Activities:
Net income $ 5,903 $ 13,191 $ 10,172
Items not requiring
(providing) cash:
Depreciation 23,364 20,831 17,369
Gain on sale of facilities -- -- (4,014)
Deferred income taxes 1,880 (234) 3,815
Amortization of excess of fair
value of assets acquired over cost -- (280) (865)
Amortization of intangible assets 1,217 1,217 --
Other deferrals 1,859 1,982 1,051
Cumulative effect of a change
in accounting principle -- -- (2,848)
Changes in assets and liabilities:
Accounts receivable (6,503) (17,685) (3,921)
Inventories (27,112) (25,461) 9,380
Prepaid expenses (2,598) (2,227) (151)
Accounts payable and
accrued expenses (790) 1,139 (6,044)
Income taxes payable (3,113) 2,690 (2,548)
------------ ------------ -------------
Cash provided (used) by operating
activities (Notes 3, 6 and 9) (5,893) (4,837) 21,396
Investing Activities:
Additions to property, plant and
equipment (22,250) (30,330) (14,360)
Change in other assets (2,413) 113 (1,179)
Sales and retirements of
property and equipment 299 182 10,951
Acquisition of assets and
certain liabilities of Logo 7 -- (57,756) --
------------ ------------ -------------
Cash provided (used) by investing
activities (24,364) (87,791) (4,588)
------------ ------------ -------------
18
Jan. 1, 1994 Jan. 2, 1993 Dec. 28, 1991
(52 weeks) (53 weeks) (52 weeks)
------------ ------------ -------------
Financing Activities:
Issuance (payment) of short-term
borrowings (79,825) 24,063 12,463
Issuance of long-term debt 121,000 140,000 24
Payments of long-term debt (2,268) (79,156) (20,524)
Preferred stock issued -- 15,000 --
Cash dividends (Note 7) (6,932) (6,690) (8,841)
Proceeds from exercise of
stock options 1,433 201 469
Other -- -- (10)
------------ ------------ -------------
Cash provided (used) by
financing activities 33,408 93,418 (16,419)
------------ ------------ -------------
Net increase (decrease) in cash
and equivalents 3,151 790 389
Cash and equivalents at beginning
of year 3,603 2,813 2,424
------------ ------------ -------------
Cash and Equivalents at End of Year $ 6,754 $ 3,603 $ 2,813
============ ============ =============
The accompanying Notes to Financial Statements are an integral part of this
statement.
19
Tultex Corporation
Consolidated Statement of Changes in Stockholders' Equity
(In thousands of dollars except share data)
Notes Total
5% Series B Common Capital Receivable- Stock-
Preferred Preferred Stock in Excess Retained Stock- holders
Stock Stock Value of Par Earnings holders Equity
---------- --------- ------- --------- -------- ----------- --------
Balance as of Dec. 29, 1990 $ 208 $28,860 $ 565 $126,304 $ (636) $155,301
Net income for the 52 weeks
ended Dec. 28, 1991 (Note 3) 10,172 10,172
Preferred stock reacquired
and canceled(108 shares) (10) (10)
Exercise of stock options 2 15 (10) 7
Collections-stockholders'
notes receivable 462 462
Cash dividends on common
stock ($.32 per share)
(Note 7) (8,831) (8,831)
Cash dividends on pre-
ferred stock (Note 7) (10) (10)
---------- --------- ------- --------- -------- ----------- --------
Balance as of Dec. 28, 1991 198 28,862 580 127,635 (184) 157,091
Net income for the 53 weeks
ended Jan. 2, 1993 (Note 3) 13,191 13,191
Series B, preferred stock
issued (150,000 shares) $15,000 15,000
Exercise of stock options 16 101 (30) 87
Collections-stockholders'
notes receivable 114 114
Cash dividends on common
stock ($.20 per share)
(Note 7) (5,649) (5,649)
Cash dividends on pre-
ferred stock (Note 7) (1,041) (1,041)
---------- --------- ------- --------- -------- ----------- --------
Balance as of Jan. 2, 1993 198 15,000 28,878 681 134,136 (100) 178,793
Net income for the 52
weeks ended Jan. 1, 1994 5,903 5,903
Exercise of stock options 175 1,208 (11) 1,372
Collections-stockholders'
notes receivables 61 61
Cash dividends on common
stock ($.20 per share)
(Note 7) (5,797) (5,797)
Cash dividends on pre-
ferred stock (Note 7) (1,135) (1,135)
---------- --------- ------- --------- -------- ----------- --------
Balance as of Jan. 1, 1994 $ 198 $ 15,000 $29,053 $1,889 $133,107 $ (50) $179,197
========== ========= ======= ========= ======== =========== ========
The accompanying Notes to Financial Statements are an integral part of this
statement.
20
Notes to Consolidated Financial Statements.
Tultex Corporation
Fiscal years ended January 1, 1994, January 2, 1993 and December 28, 1991.
Note 1--Accounting Policies
The significant accounting policies followed by Tultex Corporation and its
subsidiaries in preparing the accompanying consolidated financial statements
are as follows:
Basis of Consolidation: The consolidated financial statements include the
accounts of the company and its subsidiaries. All significant intercompany
balances and transactions are eliminated in consolidation.
Cash and Equivalents: The company considers cash on hand, deposits in banks,
certificates of deposit and short-term marketable securities as cash and
equivalents for the purposes of the statement of cash flows.
Inventories: Inventories are recorded at the lower of cost or market, with
cost determined on the first-in, first-out (FIFO) method. See Note 3 for
information concerning the change in the method of valuing inventories from
the last-in, first-out (LIFO) method to the FIFO method during 1993.
Property, Plant and Equipment: Land, buildings and equipment are carried at
cost. Major renewals and betterments are charged to the property accounts
while replace-ments, maintenance and repairs which do not improve or extend
the lives of the respective assets are expensed currently. Gain or loss on
retirement or disposal of individual assets is recorded as income or expense.
Depreciation is provided on the straight-line method for all depreciable
assets over their estimated useful lives as follows:
Classification Estimated Useful Lives
- - -------------------------- ----------------------
Land improvements 20 years
Buildings and improvements 12-50 years
Machinery and equipment 3-20 years
Capitalized Interest: Interest is capitalized on major capital expenditures
during the period of construction. Total interest costs incurred and amounts
capitalized for the fiscal years were:
(In thousands Jan. 1, Jan. 2, Dec. 28,
of dollars) 1994 1993 1991
------- ------- --------
Total interest $16,996 $13,540 $11,414
Interest capitalized -- -- (2,350)
------- ------- --------
Net interest expense $16,996 $13,540 $ 9,064
======= ======= ========
Intangible Assets: Goodwill and licenses are being amortized on a
straight-line basis over 25 years.
21
Pensions: Pension expense includes charges for amounts not less than the
actuarially determined current service cost plus amortization of prior
service costs over 30 years. The company funds amounts accrued for pension
expense not in excess of the amount deductible for federal income tax
purposes.
Revenue Recognition: The company recognizes the sale when the goods are
shipped or ownership is assumed by the customer.
Income Taxes: Income taxes are provided based upon income reported for
financial statement purposes. Deferred income taxes reflect the tax effect of
temporary differences between financial and taxable income.
Net Income per Share: Net income per common share is computed using the
weighted average number of common shares outstanding during the period after
giving retroactive effect to stock splits and stock dividends after deducting
the preferred dividend requirements which accrued during the period.
Segment Information: The company is a vertically integrated manufacturer and
marketer of activewear and leisure-time apparel which is considered a single
business segment.
Fiscal Year: The company's fiscal year ends on the Saturday nearest to
December 31, which periodically results in a fiscal year of 53 weeks. The
Universal Industries subsidiary historically observed a calendar year. The
difference in the year-ends was considered to be immaterial on the pooled
financial results contained in this report. Universal Industries, Inc.
adopted the fiscal year-end and quarterly reporting periods of Tultex as of
the acquisition date.
Other Postretirement Benefits: As further described in Note 10, the company
changed its accounting for the costs of certain life insurance and medical
benefits for eligible retirees and dependents in 1993.
Note 2--Mergers and Acquisitions
On January 31, 1992, effective as of January 1, 1992, the company acquired
assets, certain liabilities, contracts and licenses of Logo 7, Inc., a major
producer and marketer of licensed sports apparel, for a purchase price of
approximately $58 million, consisting of $15 million (stated value) of a new
series of Cumulative Convertible Preferred Stock, $7.50 Series B and $43
million cash. The $43 million cash was obtained with a 17-month interim loan
from two banks which was prepaid without penalty. The company obtained
permanent financing on June 26, 1992. The results of Logo 7, Inc. are included
in the company's consolidated statement of income for 1992. The purchase price
of $58 million has been allocated to the various acquired assets. Goodwill of
$4 million was determined and is being amortized over 25 years on a
straight-line basis. Logo 7, Inc., which was a Subchapter S corporation,
reported audited net sales of $92 million and earnings before taxes of $3
million for the 12 months ended December 31, 1991. Logo 7, Inc. had
stockholders' equity of $14 million at December 31, 1991. The following pro
forma results for 1991 include Logo 7, and do not purport to be indicative of
the results of operations that actually would have resulted had the
combination been in effect for the fiscal year or that may result in the
future. Also included in these 1991 results is Universal Industries, Inc.
which was acquired in June 1992 and accounted for as a pooling of interests.
22
(In thousands of dollars Pro Forma
except per share data) 1991 (Unaudited)
----------------
Net sales and other income $427,699
Income before cumulative effect of
a change in accounting principle 5,181
Net income 8,029
Earnings per share:
Income before cumulative effect of
a change in accounting principle $ .14
Net income $ .24
On June 30, 1992, the company completed the acquisition of Universal
Industries, Inc., a professional sports hatwear licensee located in
Mattapoisett, Massachusetts, through an all-stock deal valued at $11.1
million for nearly 1.3 million common shares. The acquisition has been
accounted for as a pooling of interests, and accordingly, the financial
statements have been restated to include the results of operations for
Universal for all periods presented.
(In thousands of dollars) Six months ended Year ended
June 1992 (Unaudited) Dec. 28,1991
--------------------- ------------
Net sales and other income:
Tultex $138,588 $315,234
Universal 20,777 34,676
--------------------- ------------
Combined $159,365 $349,910
--------------------- ------------
Income before cumulative effect of a
change in accounting principle:
Tultex $ (5,331) $ 6,651
Universal 859 673
--------------------- ------------
Combined $ (4,472) $ 7,324
--------------------- ------------
Net income:
Tultex $ (5,331) $ 9,499
Universal 859 673
--------------------- ------------
Combined $ (4,472) $ 10,172
===================== ============
23
Note 3--Inventories
The components of inventories are as follows:
(In thousands Jan. 1, Jan. 2, Dec. 28,
of dollars) 1994 1993 1991
-------- -------- --------
Raw materials $ 29,291 $ 23,664 $ 5,074
Goods in process 11,956 13,641 12,494
Finished goods 112,296 88,549 68,243
Supplies 3,735 4,312 3,557
-------- -------- --------
Total inventory $157,278 $130,166 $ 89,368
======== ======== ========
During the fourth quarter of 1993, the company changed its method of
determining the cost of inventories from the LIFO method to the FIFO method.
Under the current economic environment of low inflation, the company believes
that the FIFO method will result in a better measurement of operating results.
This change has been applied by retroactively restating the accompanying
consolidated financial statements. Although this change in method did not
materially impact net income in 1993, it decreased net income by $4,001,000
or 14 cents per share in 1992, and $416,000 or 1 cent per share in 1991.
Note 4--Property, Plant and Equipment
Property, plant and equipment, at cost, consist of the following:
(In thousands of dollars) Jan. 1, 1994 Jan. 2, 1993
------------ ------------
Land and improvements $ 3,821 $ 3,808
Buildings and improvements 68,204 65,254
Machinery and equipment 209,044 186,768
Construction in progress 2,863 8,399
------------ ------------
283,932 264,229
Less accumulated depreciation 132,157 111,041
------------ ------------
Net property, plant and equipment $ 151,775 $ 153,188
============ ============
Note 5--Short-Term Credit Agreements
Until October 6, 1993, when the company entered into a two-year revolving
credit agreement with 12 banks (see Note 6), it had formal short-term lines
of credit with lending banks aggregating $57,000,000 with interest payable at
or below the prime rate. At January 2, 1993 and December 28, 1991, the
weighted average interest rates on borrowings outstanding of $79,825,000 and
$51,000,000 were 4.1% and 5.3% respectively. The use of these lines was
restricted to the extent that the company was required to liquidate its
indebtedness to certain individual banks for a 30-day period each year. At
times, the company borrowed amounts in excess of the lines on a short-term
negotiated basis.
The company currently has short-term lines of credit with two lending banks
totaling $5,000,000. There were no borrowings outstanding under these lines
at January 1, 1994.
24
As part of the borrowing arrangements, the company was expected to maintain
average compensating cash balances, which were based on a percentage of the
available credit line by bank and the percentages varied by bank. The amount
of compensating balances required for credit lines in effect January 1, 1993
was an average of $1,320,000. The compensating balances were held under
agreements which did not legally restrict the use of such funds, and therefore
the funds were not segregated on the face of the balance sheet. The
compensating cash balances were determined daily by the lending banks based
upon balances shown by the bank, adjusted for average uncollected funds and
Federal Reserve requirements. During the periods shown in the statements, the
company was in substantial compliance with the compensating requirements.
Funds on deposit with the lending banks and considered in the compensating
balances were subject to withdrawal; however, the availability of the
short-term lines of credit were dependent upon the maintenance of sufficient
average compensating balances.
The Universal Industries subsidiary, accounted for as a pooling-of-interests
acquisition, had outstanding under short-term banker's acceptance agreements
$4,762,000 at December 31, 1991.
The company utilizes letters of credit for foreign sourcing of inventory.
Letters of credit outstanding were $9,715,000, $5,266,000 and $771,000 at
January 1, 1994, January 2, 1993 and December 28, 1991, respectively. After
October 6, 1993, all letters of credit issued were part of the revolving
credit agreement described in Note 6.
Note 6--Long-Term Debt
(In thousands of dollars) Jan. 1, 1994 Jan. 2, 1993
------------ ------------
Amount due under revolving
credit agreement $ 121,000 $ --
8 7/8% senior notes due July 1, 1999 95,000 95,000
8.94% term loan due July 31, 1996 22,917 25,000
Other indebtedness 521 706
------------ ------------
239,438 120,706
Less current maturities 8,524 2,268
------------ ------------
Total long-term debt $ 230,914 $ 118,438
============ ============
On October 6, 1993, the company signed a two-year $225 million revolving
credit agreement with 12 banks with interest at or below prime. The facility
replaced the company's previous short-term credit lines used to support
working capital and future growth. The agreement provides for a two-year
maturity with three annual options to renew.
On June 26, 1992, the company issued 8.875% unsecured, senior notes totaling
$95,000,000. Payments consist of interest only for the first two years and
installment payments of principal and interest for the remaining five years.
The proceeds of this financing retired an interim loan of $45,000,000 used to
acquire Logo 7, prepaid $25,000,000 of the $50,000,000 term loan obtained in
1989 and refinanced other indebtedness.
25
Interest is due quarterly and principal is due in 11 remaining quarterly
installments of $2,083,000 on the remaining $22,917,000 of the term loan.
As a condition to the $25,000,000 prepayment in 1992, the company indemnified
the term-loan lender for the costs and liabilities associated with an
interest rate credit exchange agreement that allowed the lender to provide
fixed-rate financing to the company at the inception of the term loan in 1989.
The term loan agreement, senior notes and revolving credit agreement contain
provisions regarding maintenance of working capital and restrictions on
payment of cash dividends. At January 1, 1994, the company was in compliance
or had obtained waivers for any violations of covenants. Consolidated
retained earnings, which were free of dividend restrictions, amounted to
$2,744,000 at January 1, 1994.
Interest paid by the company (net of capitalized amounts) in 1993, 1992 and
1991 was $16,830,000, $13,180,000 and $10,706,000, respectively.
The approximate aggregate maturities of long-term debt for each of the next
five fiscal years are as follows:
(In thousands of dollars) Total
--------
1994 $ 8,524
1995 148,541*
1996 25,373
1997 19,000
1998 19,000
*Includes maturity of $121,000,000 outstanding under revolving credit
agreement which the company expects to renew.
Note 7--Dividends
At December 30, 1989, dividends payable represented amounts paid January 2,
1990 and April 2, 1990. The latter dividend was declared in December 1989 and
was charged against stockholders' equity in that period. This dividend was
for the first quarter 1990 and therefore not included in 1989 dividends per
share information presented in this report. At January 1, 1994, dividends
payable represents amounts paid on January 3, 1994.
Note 8--Stock Options In 1988, the company's stockholders ratified the 1987
Stock Option Plan under which 700,000 shares of common stock were reserved
for stock option grants to certain officers and employees. The plan provided
that options may be granted at prices not less than the fair market value on
the date the option is granted, which means the closing price of a share of
common stock as reported on the New York Stock Exchange composite tape on
such day. Some options remain unexercised from the 1987 Stock Option Plan,
which expired November 19, 1992.
26
On March 21, 1991, the company's stockholders ratified the 1990 Stock Option
Plan under which 700,000 shares of common stock were reserved for stock
option grants to certain officers and employees. Options granted under the
1990 Plan may be incentive stock options ("ISOs") or nonqualified stock
options. The option price will be fixed by the Executive Compensation
Committee of the Board at the time the option is granted, but in the case of
an ISO, the price cannot be less than the share's fair market value on the
date of grant. Grants must be made before October 18, 2000 and expire within
10 years of the date of grant. In exercising options, an employee may
receive a loan from the company for up to 90% of the exercise price.
Outstanding loans are shown as a reduction of stockholders' equity on the
balance sheet.On October 28, 1993, the Board of Directors approved an
increase of 500,000 shares in the maximum number of shares to be issued
pursuant to the exercise of options granted under the Plan, extended the
date that grants could be made to October 27, 2003, and provided that no
participant may be granted options in any calendar year for more than 50,000
shares of Common Stock. Shareholders will be asked to approve these change at
the Annual Meeting.
A summary of the changes in the number of common shares under option for
each of the three previous years follows:
Year ended January 1, 1994 Number of Shares Per Share Option Price
---------------- ----------------------
Outstanding at beginning of year 1,015,833 $7.50-$9.63
Granted 280,000 $6.88-$9.75
Exercised 175,600 $7.63-$9.63
Expired 165,000 $7.88
Canceled 27,000 $7.63-$9.63
--------------- ----------------------
Outstanding at end of year 928,233 $6.88-$9.75
=============== ======================
Exercisable at end of year 748,233 $6.88-$9.75
=============== ======================
Shares reserved for future grant:
Beginning of year 307,400
===============
End of year 39,900
===============
Year ended January 2, 1993 Number of Shares Per Share Option Price
---------------- ----------------------
Outstanding at beginning of year 545,196 $7.50-$11.92
Granted 536,600 $8.38-$ 9.63
Exercised 14,734 $7.63-$ 9.63
Expired 26,463 $11.92
Canceled 24,766 $7.63-$ 9.63
---------------- ----------------------
Outstanding at end of year 1,015,833 $7.50-$ 9.63
================ ======================
Exercisable at end of year 945,833 $7.50-$ 9.63
================ ======================
Shares reserved for future grant:
Beginning of year 836,350
================
End of year 307,400
================
27
Year ended December 28, 1991 Number of Shares Per Share Option Price
---------------- ----------------------
Outstanding at beginning of year 861,483 $7.50-$12.67
Granted 30,000 $8.25-$ 8.38
Exercised 2,550 $7.63
Expired 172,446 $12.67
Canceled 171,291 $7.63-$12.67
---------------- ----------------------
Outstanding at end of year 545,196 $7.50-$11.92
---------------- ----------------------
Exercisable at end of year 515,196 $7.50-$11.92
================ ======================
Shares reserved for future grant:
Beginning of year 47,500
================
End of year 836,350
================
Note 9--Provision for Income Taxes
The components of the provision for federal and state income taxes are
summarized as follows:
Jan. 1, Jan. 2, Dec. 28,
(In thousands of dollars) 1994 1993 1991
------- ------- --------
Currently payable:
Federal $ 1,192 $ 6,694 $ (459)
State 116 600 87
------- ------- --------
1,308 7,924 (372)
------- ------- --------
Deferred:
Federal 1,723 (214) 3,275
State 157 (20) 540
------- ------- --------
1,880 (234) 3,815
------- ------- --------
Total Provision $ 3,188 $ 7,060 $ 3,443
======= ======= ========
Deferred income taxes resulted from the following temporary differences:
Jan. 1, Jan. 2, Dec. 28,
(In thousands of dollars) 1994 1993 1991
------- ------- --------
Depreciation $ 2,095 $ 2,864 $ 2,346
Inventory (24) (3,110) (188)
Pension (486) (83) 373
Debt repayment penalty -- -- 415
Abandonment loss 187 -- 845
Goodwill 283 -- --
Postretirement benefits (172) -- --
Other (3) 95 24
------- ------- --------
Total $ 1,880 $ (234) $ 3,815
======= ======= ========
28
Significant components of the deferred tax liabilities and assets are as
follows:
(In thousands of dollars) Jan. 1, 1994 Jan. 2, 1993
------------ ------------
Deferred tax liabilities:
Tax over book depreciation $ 15,990 $ 13,842
Spare parts inventory 797 788
Other 665 425
------------ ------------
Gross deferred tax liabilities 17,452 15,055
------------ ------------
Deferred tax assets:
Bad debt reserves 766 765
Inventory reserves 1,211 1,186
Postretirement benefits 176 --
Pension obligations 962 462
Workmen's compensation 182 181
Abandonment loss -- 193
Other 141 134
Gross deferred tax assets 3,438 2,921
------------ ------------
Net deferred tax liabilities $ 14,014 $ 12,134
============ ============
A reconciliation of the statutory federal income tax rates with the company's
effective income tax rates for 1993, 1992 and 1991 was as follows:
Jan. 1, Jan. 2, Dec. 28,
1994 1993 1991
------- ------- --------
Statutory federal rate 34% 34% 34%
State rate, net 2 2 3
Goodwill -- -- (3)
Untaxed foreign income -- (1) (2)
Other (1) -- --
------- ------- --------
Effective income tax rate 35% 35% 32%
======= ======= ========
Income tax payments were $4,512,000, $4,404,000 and $2,705,000 for 1993, 1992
and 1991, respectively.
In 1992, the company adopted the provisions of the Statement of Financial
Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes." This
Statement, issued in February 1992, superseded SFAS No. 96, "Accounting for
Income Taxes," which the company had adopted in 1991. Both statements require
the liability method in accounting for deferred income taxes. The company's
adoption of SFAS No. 109 resulted in no material effect on 1992 earnings. The
cumulative effect of the change in accounting principle due to the adoption
of SFAS No. 96 at the beginning of the 1991 fiscal year was $2,848,000, or
10 cents per share, and is separately shown in the 1991 statement of income.
29
Note 10--Employee Benefits
All qualified employees of the parent company and its Universal subsidiary
are covered by a noncontributory, defined benefit plan. The benefits are
based on years of service and the employee's highest 5 consecutive calendar
years of compensation paid during the 10 most recent years before retirement.
Prior service costs are amortized over 30 years. The status of the defined
benefit plan as of January 1, 1994 and January 2, 1993 was as follows:
(In thousands of dollars) 1993 1992
------- -------
Fair value of plan assets, primarily
listed stock and corporate and
government debt $40,261 $40,006
------- -------
Accumulated benefit obligation,
including vested benefits of $29,294
and $27,149, respectively 30,114 27,977
Additional benefits based on estimated
future salary levels 6,851 9,592
------- -------
Projected benefit obligation 36,965 37,569
------- -------
Plan assets in excess of projected
benefit obligation 3,296 2,437
Unrecognized net gain (2,910) (1,253)
Unrecognized net transitional assets (2,308) (2,777)
Unrecognized prior service cost 257 293
------- -------
Accrued pension liability $(1,665) $(1,300)
======= =======
The following rate assumptions were made for the noncontributory, defined
benefit and the nonqualified unfunded supplementary retirement plans:
1993 1992
----- ----
Discount rate of return on
projected benefit obligation 8.0% 9.0%
Rate of return on plan assets 10.0% 9.0%
The long-term rate of salary progression for 1993 reflected no anticipated
rate increase for the first two years, followed by 3.5% for two years, 4% for
six years and 5% thereafter. The comparable rate in 1992 was 5% for all years.
The changes in rates from year to year were made to reflect what management
considered to be a better approximation of the rates to be realized.
30
Pension expense in 1993 and 1992 included the following components:
(In thousands of dollars) 1993 1992
------- -------
Service cost-benefits earned during the period $ 1,861 $ 1,697
Interest on projected benefit obligation 2,893 3,176
Actual gain on plan assets (2,362) (2,400)
Net deferral (1,919) (1,370)
Curtailment loss -- 104
Settlement gain -- (151)
------- -------
Net periodic pension cost $ 473 $ 1,056
======= =======
The company's policy has been to fund the minimum required contribution after
the end of the fiscal year plus interest on the contribution from the end of
the plan year until paid. The company's Universal Industries subsidiary
historically funded the maximum required contribution during the year.
At the end of 1992, Universal Industries, Inc. pension plan's future service
benefits were frozen and the plan assets were absorbed into the company's
pension plan, which resulted in a curtailment loss of $104,000.
The company has a nonqualified, unfunded supplementary retirement plan for
which it has purchased cost recovery life insurance on the lives of the
participants. The company is the sole owner and beneficiary of such policies.
The amount of coverage is designed to provide sufficient revenues to recover
all costs of the plan if assumptions made as to mortality experience, policy
earnings and other factors are realized. Expenses related to the plan were
$547,000 in 1993, $395,000 in 1992 and $312,000 in 1991. The actuarially
determined liability which has been included in other deferrals was
$3,190,000 at January 1, 1994, $2,313,000 at January 2, 1993 and $1,962,000
at December 28, 1991.
The following table sets forth the plan's status and amounts recognized in
the company's financial statements at January 1, 1994 and January 2, 1993:
(In thousands of dollars) 1993 1992
------- -------
Fair value of plan assets $ -- $ --
------- -------
Accumulated benefit obligation, including
vested benefits of $3,043 and $2,284,
respectively 3,190 2,313
Additional benefits based on estimated
future salary levels (5) 1,341
------- -------
Projected benefit obligation 3,185 3,654
------- -------
Projected benefit obligation in excess
of plan assets (3,185) (3,654)
Unrecognized net loss 667 1,213
Unrecognized transitional obligation 1,092 1,193
Adjustment required to recognize
minimum liability (1,764) 1,065)
------- -------
Unfunded accrued supplementary costs $(3,190) $(2,313)
======= =======
31
Net supplementary pension cost for the two years included the following
components:
(In thousands of dollars) 1993 1992
------ ------
Service cost-benefits earning
during the period $ 110 $ 95
Interest on projected benefit obligation 276 200
Net amortization 161 100
------ ------
Net periodic supplementary pension cost $ 547 $ 395
====== ======
Substantially all employees meeting certain service requirements are
eligible to participate in the company's employee savings (401-K) plan.
Employee contributions are limited to a percentage of their compensation, as
defined in the plan. Although the plan did not provide for any company
contributions in 1992, a matching provision became effective April 1993, but
was discontinued on January 2, 1994.
A new profit sharing plan was implemented January 1, 1991 which provides for
a quarterly payment to employees if a profit is reported in the most recently
completed quarter and is sufficient to recover any previously reported
quarterly losses. This replaced the employee bonus plan that was in effect
in the previous years. The employee profit sharing/bonus expense was $727,000
in 1993, $4,614,000 in 1992 and $2,446,000 in 1991.
The company also provides certain postretirement medical and life insurance
benefits to substantially all employees who retire with a minimum of 15 years
of service for the period of time until the employee and any dependents reach
age 65. The medical plan requires monthly contributions by retired
participants which are dependent on the participant's length of service, age
at the date of retirement and Medicare eligibility. The life insurance plan
is noncontributory. Prior to 1993, the company expensed the costs relating to
these unfunded plans as incurred. Such costs amounted to approximately
$375,000 in 1992 and 1991.
In 1993, the company adopted Statement of Financial Accounting Standards
(SFAS) No. 106, "Employers' Accounting for Postretirement Benefits Other Than
Pensions." The standard required companies to recognize the estimated costs
of provided postretirement benefits on an accrual basis. The company elected
the delayed recognition method of adoption which allows amortization of the
initial transitional obligation over a 20-year period. At January 3, 1993,
the actuarially determined accumulated postretirement benefit was $5,101,000.
The amounts recognized on the company's balance sheet at January 1, 1994 were
as follows:
(In thousands of dollars) 1993
-------
Accumulated postretirement
benefit obligation $ 5,323
Unrecognized transitional
obligation (4,846)
-------
Accrued liability $ 477
=======
32
Net periodic postretirement benefit cost for 1993 included the following
components:
(In thousands of dollars) 1993
------
Service cost-benefits earned during
the period $ 171
Interest on accumulated postretirement
benefit obligation 402
Amortization of accumulated
postretirement benefit obligation 256
------
Total $ 829
======
The discount rate used in determining the accumulated postretirement benefit
obligation was 8%. The assumed medical cost trend rate was 12% in 1993,
declining by 1% per year until an ultimate rate of 5% is achieved. The medical
cost trend rate assumption has a significant effect on the amount of the
obligation and net periodic cost reported. A one percentage point increase in
the medical cost trend rate would have increased the accumulated
postretirement benefit obligation by $337,000 and the aggregate service and
interest cost components of the net periodic postretirement benefit cost for
1993 by $52,000.
In November 1992, the Financial Accounting Standards Board released Statement
No. 112 "Employers' Accounting for Postemployment Benefits." As the company
does not have significant postemployment benefits, the adoption of this
statement in 1994 is not expected to have a material impact on the company's
results of operations or financial position.
Note 11--Quarterly Financial Information (Unaudited)
The following is a summary of the unaudited quarterly financial information
for the years ended January 1, 1994 and January 2, 1993.*
(In thousands of dollars
except per share data) 1993 1992
-------- --------
Net Sales and Other Income
1st quarter $ 91,022 $ 70,762
2nd quarter 100,238 88,603
3rd quarter 187,109 181,129
4th quarter 155,242 163,452
-------- --------
Total $533,611 $503,946
======== ========
Gross Profit
1st quarter $ 21,957 $ 14,823
2nd quarter 23,386 17,805
3rd quarter 38,742 37,813
4th quarter 31,985 45,820
-------- --------
Total $116,070 $116,261
======== ========
33
1993 1992
-------- --------
Income Before Income Taxes
1st quarter $ (2,295) (4,849)
2nd quarter 681 (2,816)
3rd quarter 7,437 7,729
4th quarter 3,268 20,187
-------- --------
Total $ 9,091 $ 20,251
======== ========
Provision for Income Taxes
1st quarter $ (852) $ (1,791)
2nd quarter 246 (1,402)
3rd quarter 2,767 3,086
4th quarter 1,027 7,167
-------- --------
Total $ 3,188 $ 7,060
======== ========
Net Income
1st quarter $ (1,443) $ (3,058)
2nd quarter 435 (1,414)
3rd quarter 4,670 4,643
4th quarter 2,241 13,020
-------- --------
Total $ 5,903 $ 13,191
======== ========
Net Income per Common Share
1st quarter $ (.06) $ (.11)
2nd quarter .01 (.06)
3rd quarter .15 .15
4th quarter .06 .44
-------- --------
Total $ .16 $ .42
======== ========
*The first two quarters of 1992 have been restated to reflect the acquisition
of Universal Industries, Inc. treated as a pooling of interests. In addition,
all quarters have been restated to reflect a change in accounting method from
LIFO to FIFO.
34
Note 12--Lease Commitments
At January 1, 1994, the company was obligated under a number of
noncancelable, renewable operating leases as follows:
Data Manufacturing
Processing Facilities and
(In thousands of dollars) Equipment Other Total
---------- -------------- -------
1994 $ 3,064 $ 5,316 $ 8,380
1995 2,568 4,582 7,150
1996 1,905 3,578 5,483
1997 1,450 2,701 4,151
1998 1,051 2,124 3,175
1999 and after -- 14,771 14,771
---------- ------------- -------
$ 10,038 $ 33,072 $43,110
========== ============= =======
Rental expense charged to income was $15,092,000 in 1993, $13,696,000 in
1992 and $12,309,000 in 1991.
Note 13--Employment Agreements
The company has entered into employment continuity agreements with certain
of its executives which provide for the payments to these executives of
amounts up to three times their annual compensation plus continuation of
certain benefits if there is a change in control of the company (as defined)
and a termination of their employment. The maximum contingent liability at
January 1, 1994 under these agreements was approximately $4,560,000.
Employment agreements with certain executives were executed as a result of
the Logo 7 acquisition. Under predefined events of termination, the company
could incur a maximum liability of $9,786,000 as of January 1, 1994.
Note 14--Concentration of Credit Risk
The company's concentration of credit risk is limited due to the large number
of primarily domestic customers who are geographically dispersed. The company
has no customer that constituted 10% of net sales in 1993. As disclosed on
the balance sheet, the company maintains an allowance for doubtful accounts
to cover estimated credit losses.
Note 15--Shareholder Rights Plan
In March 1990, the Board of Directors of the company adopted a Shareholder
Rights Plan and declared a dividend of one right for each outstanding share
of common stock to shareholders of record April 2, 1990. Each right entitles
the registered holder to purchase from the company, until the earlier of
March 22, 2000 or the redemption of the rights, one one-thousandth of a
share of newly authorized Junior Participating Cumulative Preferred Stock,
Series A, without par value, at an exercise price of $40. The rights are not
exercisable or transferable apart from the common stock until the earlier of
(i) 10 days following the public announcement that a person or a group of
affiliated persons has acquired or obtained the right to acquire beneficial
ownership of 10% or more of the company's outstanding common stock or (ii)
10 business days following the commencement of a tender offer or exchange
offer that would result in a person or group owning 10% or more of the
company's outstanding common stock. The company may redeem the rights at a
price of $.01 per right at any time prior to the acquisition of 10% or more
of the company's outstanding common stock or certain other triggering events.
35
Note 16--Stock Purchase Plan
In February 1994, the company initiated the Salaried Employees' Stock
Purchase Plan. Under the plan, employees may elect to purchase shares of the
company's common stock in amounts ranging from 20-30% of their annual salary.
Employees will pay for the stock through payroll deductions over a 60-month
period. The shares will be held by the company and interest of 6% per annum
will be charged until the end of the 60-month period. The price of the
shares will be fixed as of the last day of trading in February 1994. The
company has reserved 925,000 shares of common stock for issuance pursuant to
the plan.
36
Report of Independent Accountants
To the Stockholders and Board of Directors of Tultex Corporation
In our opinion, based upon our audits and the report of other auditors, the
accompanying consolidated balance sheet and the related consolidated
statements of income, of cash flows and of changes in stockholders' equity
present fairly, in all material respects, the financial position of Tultex
Corporation and its subsidiaries (the company) at January 1, 1994 and
January 2, 1993, and the results of their operations and their cash flows
for each of the three years in the period ended January 1, 1994, in
conformity with generally accepted accounting principles. These financial
statements are the responsibility of the company's management; our
responsibility is to express an opinion on these financial statements based
on our audits. We did not audit the financial statements of Universal
Industries, Inc., a wholly-owned subsidiary, which statements reflect total
revenues of $34,984,000 for the year ended December 31, 1991. Those
statements were audited by other auditors whose report thereon has been
furnished to us, and our opinion expressed herein, insofar as it relates to
the amounts included for Universal Industries, Inc., is based solely on the
report of other auditors. We conducted our audits of these statements in
accordance with generally accepted auditing standards which require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and significant
estimates made by management, and evaluating the overall financial statement
presentation. We believe that our audits and the report of other auditors
provide a reasonable basis for the opinion expressed above.
As discussed in Note 9 of Notes to Financial Statements, the company changed
its method of accounting for income taxes in 1992 and 1991. In addition, as
discussed in Notes 3 and 10 of Notes to the Financial Statements, the
company changed its method of valuing inventory and accounting for
postretirement medical and life insurance benefits, respectively, in 1993.
Price Waterhouse
Winston-Salem, North Carolina
February 23, 1994
37
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
None.
PART III
Item 10. Directors and Executive Officers of the Registrant.
With respect to the directors of the company, the information required by
Item 10 of Form 10-K appears on pages 3 through 5 of the company's 1994
Proxy Statement and is incorporated herein by reference.
With respect to the executive officers of the company, the information
required by Item 10 of Form 10-K appears in Part I of this report.
Item 11. Executive Compensation.
The information required by Item 11 of Form 10-K appears on pages 6
(beginning with "Executive Compensation") through 9 of the company's 1994
Proxy Statement and is incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
The information required by Item 12 of Form 10-K appears on page 1 and 2 of
the company's 1994 Proxy Statement and is incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions.
The information required by Item 13 of Form 10-K appears on page 11 of the
company's 1994 Proxy Statement and is incorporated herein by reference.
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.
(1) Financial Statements:
The financial statements filed as part of this report are listed
on the Index to Consolidated Statements on page 12.
(2) Financial Statement Schedules: Page in Form 10-K
Report of Independent Accountants on
Financial Statement Schedules:
Price Waterhouse F-1(a)
Coopers & Lybrand F-1(b and c)
Consolidated Financial Statement
Schedules for each of the three years
in the period ended January 1, 1994:
V - Property, Plant and Equipment F-2
38
VI - Accumulated Depreciation of
Property, Plant and Equipment F-3
VIII - Valuation and Qualifying Accounts
and Reserves F-4
IX - Short-Term Borrowings F-5
X - Supplementary Income Statement
Information F-6
All other schedules are omitted because they are not applicable or the
required information is shown in the financial statements or notes thereto.
(3) Exhibits
3.1 Restated Articles of Incorporation (filed as Exhibit 3.1 to the
Company's Form 10-K for the year ended December 29, 1990 and
incorporated herein by reference)
3.2 Articles of Amendment to the Restated Articles of Incorporation
(filed as Exhibit 3 to the Company's 8-K dated January 31, 1992
and incorporated herein by reference)
3.3 By-Laws (filed as Exhibit 3.3 to the Company's Form 10-K for
the year ended January 2, 1993 and incorporated herein by
reference)
4.1 Note Agreement dated as of June 1, 1992 (filed as exhibit to
the Company's Form 10-Q for the quarter ended June 27, 1992 and
incorporated herein by reference)
4.2 Rights Agreement originally dated March 22, 1990 between the
Company and Sovran Bank, N.A. (subsequently assigned to
Wachovia Bank of North Carolina, N.A.), as Rights Agent
(incorporated herein by reference to Exhibit 4.1 of the
Company's Current Report on Form 8-K March 22, 1990)
10.1 Tultex Corporation 1987 Stock Option Plan (filed as Exhibit B
to the company's Definitive Proxy Statement dated and mailed
January 15, 1988 and incorporated herein by reference) *
10.2 Tultex Corporation 1990 Stock Option Plan (filed as Exhibit A
to the company's Definitive Proxy Statement dated and mailed
February 14, 1991 and incorporated herein by reference) *
10.3 Resolution of the Board of Directors of Tultex Corporation as
to the establishment of a bonus fund (filed as an Exhibit to
the company's Form 10-K for fiscal year ended November 28, 1986
and incorporated herein by reference) *
10.4 Supplemental Retirement Plan (filed as an exhibit to the
company's Form 10-K dated March 7, 1990 and incorporated
herein by reference) *
10.5 Tultex Corporation Employee Savings Plan (filed as an exhibit
to the company's Form 10-K for the fiscal year ended November
27, 1987 and incorporated herein by reference) *
39
10.6 Form of Employment Continuity Agreement (filed as exhibits to
the company's Form 10-Q for the quarter ended April 1, 1989
and the company's Form 10-Q for the quarter ended March 31,
1990 and incorporated herein by reference) *
10.7 Stock Purchase Agreement (filed as an exhibit to the Company's
Form S-1 dated September 29, 1992 and incorporated herein by
reference)
10.8 Asset Purchase Agreement, dated as of November 16, 1991, among
the Tultex Corporation, Logo 7, Inc. (Ind.), and Herbert and
Melvin Simon, as amended on January 31, 1992 (filed as Exhibit
10(a) to the company's Form 8-K dated January 31, 1992 and
incorporated herein by reference)
10.9 Standstill Agreement, dated as of January 31, 1992, among
Tultex Corporation, Logo 7, Inc. (Ind.), Melvin Simon and
Herbert Simon (filed as Exhibit 10(b) to the company's Form 8-K
dated January 31, 1992 and incorporated herein by reference)
10.10 Term Loan Agreement, dated September 11, 1989 among Tultex
Corporation, Tulstar Factors, Inc. and Wachovia Bank and
Trust Company (filed as Exhibit 10.9 to the Company's Form
S-1 dated September 29, 1992 and incorporated herein by
reference)
10.11 First Amendment to Term Loan Agreement, dated January 30,
1992, among Tultex Corporation and Wachovia Bank of North
Carolina, N.A. (filed as Exhibit 10(f) to the Company's Form
8-K dated January 31, 1992 and incorporated herein by reference)
10.12 Second Amendment to Term Loan Agreement, dated April 23,
1992, among Tultex Corporation, Tulstar Factors, Inc. and
Wachovia Bank of North Carolina, N.A. (filed as Exhibit
10.11 to the Company's Form S-1 dated September 29, 1992
and incorporated herein by reference)
10.13 Third Amendment to Term Loan Agreement, dated October 2,
1992, among Tultex Corporation, Tulstar Factors, Inc. and
Wachovia Bank of North Carolina, N.A.
10.14 Fourth Amendment to Term Loan Agreement, dated November 30,
1992, among Tultex Corporation, Tulstar Factors, Inc. and
Wachovia Bank of North Carolina, N.A.
10.15 Fifth Amendment to Term Loan Agreement, dated as of July 4,
1993, among Tultex Corporation, Tulstar Factors, Inc. and
Wachovia Bank of North Carolina, N. A. (files as Exhibit
10.16 to the Company's Form 10-Q for the quarter ended
October 2, 1993 and incorporated herein by reference)
10.16 Amendment No. 1 to Note Agreement, dated September 1, 1993,
among Tultex Corporation and certain institutional investors
(filed as Exhibit 10.17 to the Company's Form 10-Q for the
quarter ended October 2, 1993 and incorporated herein by
reference)
40
10.17 Credit Agreement, dated as of October 6, 1993, for $225
million credit facility (filed as Exhibit 10.18 to the
Company's Form 10-Q for the quarter ended October 2, 1993
and incorporated herein by reference)
10.18 Tultex Corporation Salaried Employees' Common Stock Purchase
Plan, dated February 11, 1994 (filed as Exhibit 4.5 to the
Company's Form S-8 dated February 11, 1994 and incorporated
herein by reference)
11 The computation of earnings per share can be clearly determined
from the financial statements of the Company contained in the Annual
Report to Stockholders
18 Preferability letter of Price Waterhouse
21 Subsidiaries of the company (filed herewith)
23.1 Consent of Price Waterhouse (filed herewith)
23.2 Consent of Coopers & Lybrand (filed herewith)
* Management contract or compensatory plan arrangement
(b) Reports of Form 8-K
No reports on Form 8-K were filed for the quarter ended
January 1, 1994.
41
REPORT OF INDEPENDENT ACCOUNTANTS ON
FINANCIAL STATEMENT SCHECULES
To the Board of Directors of
Tultex Corporation
Our audits of the consolidated financial statements referred to in our report
dated February 23, 1994 appearing on Page 28 of the 1993 Annual Report to
Stockholders of Tultex Corporation, (which report and consolidated financial
statements are incorporated by reference in this Annual Report on Form 10-K),
also included an audit of the Financial Statement Schedules listed in the
accompanying index of this Form 10-K. In our opinion, these Financial Statement
Schedules present fairly, in all material respects, the information set forth
therein when read in conjunction with the related consolidated finanical
statements.
/s/ Price Waterhouse
- - --------------------
PRICE WATERHOUSE
Winston-Salem, North Carolina
February 23, 1994
F-1(a)
42
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of
Universal Industries, Inc.:
We have audited the consolidated balance sheets of Universal Industries, Inc.
as of December 31, 1991 and the related consolidated statements of income and
retained earnings and cash flows and for the two year period ended December 31,
1991 (not presented separately herein). These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the finanical statements referred to above present fairly, in
all material respects, the finanical position of Universal Industries Inc. as
of December 31, 1991, and the results of its operations and its cash flows for
each of the two year period ended December 31, 1991 in conformity with
generally accepted accounting principles.
/s/ Coopers & Lybrand
- - ---------------------
COOPERS & LYBRAND
Boston, Massachusetts
March 19, 1992
F-1(b)
43
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of
Universal Industries Inc.:
In connection with our audits of the consolidated financial statements of
Universal Industries, Inc. as of December 31, 1991 and for the two year
period ended December 31, 1991, (not presented separately herein), we have
also audited the following financial statement schedules:
Schedule V - Property, Plant and Equipment
Schedule VI - Accumulated Depreciation of Property, Plant and
Equipment
Schedule VIII - Valuation and Qualifying Accounts
Schedule IX - Short-term Borrowings
Schedule X - Supplementary Income Statement Information
In our opinion, these financial statement schedules, when considered in
relation to the basic finanical statements taken as a whole, present fairly,
in all material respects, the information required to be included therein.
/s/ Coopers & Lybrand
- - ---------------------
COOPERS & LYBRAND
Boston, Massachusetts
March 19, 1992
F-1(c)
44
TULTEX CORPORATION SCHEDULE V
PROPERTY, PLANT AND EQUIPMENT CONSOLIDATED
(In thousands of dollars)
Sales
Balance at and Balance
beginning Additions retire- at end
of period at cost ments Other of period
--------- --------- ------- ----- ---------
For the fifty-two weeks
ended December 28, 1991
Land & improvements $ 3,266 $ 706 $ 117 $ 0 $ 3,855
Buildings & improvements 32,749 26,763 3,727 0 55,785
Machinery & equipment 112,510 60,562 14,854 (2) 158,216
Furniture & fixtures 8,654 653 292 2 9,017
Transportation equipment 170 7 48 0 129
Construction in progress 80,845 (74,331)(a) 0 0 6,514
-------- ------- ------- ------ --------
$238,194 $14,360 $19,038 $ 0 $233,516
45
Sales
Balance at and Balance
beginning Additions retire- at end
of period at cost ments Other of period
--------- --------- ------- ----- ---------
For the fifty-three weeks
ended January 2, 1993
Land & improvements $ 3,855 $ 5 $ 52 $ 0 $ 3,808
Buildings & improvements 55,785 4,019 0 5,450 65,254
Machinery & equipment 158,216 25,781(b) 3,000 (5,450) 175,547
Furniture & fixtures 9,017 2,048 10 0 11,055
Transportation equipment 129 37 0 0 166
Construction in progress 6,514 1,885 0 0 8,399
-------- ------- ------- ------ --------
$233,516 $33,775 $ 3,062 $ 0 $264,229
For the fifty-two weeks
ended January 1, 1994
Land & improvements $ 3,808 $ 13 $ 0 $ 0 $ 3,821
Buildings & improvements 65,254 2,950 0 0 68,204
Machinery & equipment 175,547 22,919 2,455 2 196,013
Furniture & fixtures 11,055 1,857 92 (2) 12,818
Transportation equipment 166 47 0 0 213
Construction in progress 8,399 (5,536) 0 0 2,863
-------- ------- ------- ------ --------
$264,229 $22,250 $ 2,547 $ 0 $283,932
(a) These additions primarily relate to construction of the Customer Service
Center.
(b) Includes fixed assets acquired from Logo 7 of $3,445,000.
F-2
46
TULTEX CORPORATION SCHEDULE VI
ACCUMULATED DEPRECIATION OF PROPERTY, CONSOLIDATED
PLANT AND EQUIPMENT
Sales
Balance at and Balance
(In thousands beginning Additions retire- at end
of dollars) of period at cost ments Other of period
--------- --------- ------- ----- ---------
For the fifty-two weeks
ended December 28, 1991
Land & improvements $ 163 $ 52 $ 1 $ 0 $ 214
Buildings & improvements 13,673 1,891 1,563 0 14,001
Machinery & equipment 67,091 14,480 10,217 (2) 71,352
Furniture & fixtures 6,759 922 273 2 7,410
Transportation equipment 136 24 47 0 113
--------- -------- ------- ----- --------
$ 87,822 $ 17,369 $12,101 $ 0 $ 93,090
For the fifty-three weeks
ended January 2, 1993
Land & improvements $ 214 $ 69 $ 0 $ 0 $ 283
Buildings & improvements 14,001 2,651 0 141 16,793
Machinery & equipment 71,352 17,269 2,871 (141) 85,609
Furniture & fixtures 7,410 826 9 0 8,227
Transportation equipment 113 16 0 0 129
--------- -------- ------- ----- --------
$ 93,090 $ 20,831 $ 2,880 $ 0 $111,041
For the fifty-two weeks
ended January 1, 1994
Land & improvements $ 283 $ 69 $ 0 $ 0 $ 352
Buildings & improvements 16,793 2,799 0 0 19,592
Machinery & equipment 85,609 19,398 2,157 2 102,852
Furniture & fixtures 8,227 1,073 91 (2) 9,207
Transportation equipment 129 25 0 0 154
--------- -------- ------- ------ --------
$ 111,041 $ 23,364 $ 2,248 $ 0 $132,157
F-3
47
TULTEX CORPORATION SCHEDULE VIII
VALUATION AND QUALIFYING ACCOUNTS
CONSOLIDATED AND RESERVES
(In thousands of dollars)
Balance at Additions
Reserve for doubtful beginning charged to Balance at
Accounts and returns of period operations Reductions end of period
--------- ---------- ---------- -------------
For the fifty-two weeks
ended December 28, 1991
$ 2,432 $ 3,337 $(4,047)(1) $ 1,722
For the fifty-three weeks
ended January 2, 1993
$ 1,722 $ 4,703 $(4,065)(1) $ 2,360
For the fifty-two weeks
ended January 1, 1994
$ 2,360 $ 3,241 $(3,227)(1) $ 2,374
(1) Amounts represent write-off of uncollectible receivable balances.
F-4
48
TULTEX CORPORATION SCHEDULE IX
SHORT-TERM BORROWINGS CONSOLIDATED
(In thousands of dollars)
Maximum Average Weighted
Category of Balance Weighted amount amount average
aggregate at end average outstanding outstanding interest rate
short-term of interest during the during the during the
borrowings period rate period period (1) period (2)
------- -------- ----------- ----------- -------------
For the fifty-two weeks
ended December 28, 1991
Short-term borrowings $55,762 5.4% $112,237 $72,667 6.5%
For the fifty-three
weeks ended
January 2, 1993
Short-term borrowings $79,825 4.1% $113,578 $81,042 4.4%
For the fifty-two weeks
ended January 1,
1994 (3)
Short-term borrowings $ 0 0.0% $186,075 $92,128 3.7%
(1) Average short-term borrowings outstanding during the period are computed
by averaging the daily short-term borrowings outstanding for the period.
(2) The weighted average interest rate for the period is computed by
annualizing the short-term interest charged during the period and
dividing by the weighted average short-term loans outstanding.
(3) On October 6, 1993, the company signed a two-year $225 million revolving
credit agreement which replaced its short-term credit lines.
F-5
49
TULTEX CORPORATION SCHEDULE X
SUPPLEMENTARY INCOME STATEMENT INFORMATION
CONSOLIDATED
52 weeks 53 weeks 52 weeks
ended ended ended
(In thousands December 28, January 2, January 1,
of dollars) 1991 1993 1994
------------ ---------- ----------
The following amounts were
charged to costs and expenses
Maintenance and repairs $ 6,947 $ 7,731 $ 7,116
Advertising costs $ 4,176 (1) $ 6,840 $ 7,666
Royalty expenses $ 2,689 (1) $15,016 $19,795
Other amounts do not exceed one percent of total sales and revenues as
reported in the consolidated statements of income.
(1) Did not exceed one percent of total sales and revenues as reported in
the consolidated statements of income for these periods.
F-6
50
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
Tultex Corporation
(Registrant)
/s/ John M. Franck
-----------------------------------
By: John M. Franck, Chairman & CEO
Date: April 16, 1994
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
April 16, 1994 /s/ John M. Franck
--------------------------------------
John M. Franck, Chairman, CEO &
Director (Principal Executive Officer)
April 16, 1994 /s/ Charles W. Davies, Jr.
----------------------------------
Charles W. Davies, Jr., President,
COO & Director
April 16, 1994 /s/ Don P. Shook
------------------------------
Don P. Shook, Vice President -
Human & Financial Services
(Principal Financial Officer)
April 16, 1994 /s/ Suzanne H. Wood
------------------------------
Suzanne H. Wood, Controller
(Principal Accounting Officer)
April 16, 1994 /s/ William F. Franck
---------------------------
William F. Franck, Director
April 16, 1994 /s/ H. R. Hunnicutt, Jr.
----------------------------------
Harold R. Hunnicutt, Jr., Director
April 16, 1994 /s/ Lathan M. Ewers
------------------------------
Lathan M. Ewers, Jr., Director
51
April 16, 1994 /s/ Irving M. Groves, Jr.
-------------------------------
Irving M. Groves, Jr., Director
April 16, 1994 /s/ Bruce M. Jacobson
---------------------------
Bruce M. Jacobson, Director
April 16, 1994 /s/ J. Burness Frith
--------------------------
J. Burness Frith, Director
April 16, 1994 /s/ Richard M. Simmons
---------------------------------
Richard M. Simmons, Jr., Director
April 16, 1994 /s/ John M. Tully
-----------------------
John M. Tully, Director
52
EXHIBITS
ANNUAL REPORT ON FORM 10-K
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED JANUARY 1, 1994
TULTEX CORPORATION
COMMISSION FILE NUMBER 1-8016
53
Exhibit Index
18 Preferability letter of Price Waterhouse
21 Subsidiaries of the Company
23.1 Consent of Price Waterhouse
23.2 Consent of Coopers & Lybrand
54
Exhibit 18
February 23, 1994
To the Board of Directors
of Tultex Corporation
Dear Directors:
We have audited the consolidated financial statements included in the
Corporation's Annual Report on Form 10-K for the year ended January 1, 1994
and issued our report theron dated February 23, 1994. Note 3 to the
consolidated financial statements describes a change in the Corporation's
method of determining the cost of inventories from the last-in, first-out to
the first-in, first-out method. It should be understood that the preferability
of one acceptable method of inventory accounting over another has not been
addressed in any authoritative accounting literature and in arriving at our
opinion expressed below, we have relied on management's business planning and
judgment. Based on our discussions with management and the stated reasons for
the change, we believe that such change represents, in your circumstances,
the adoption of a preferable alternative accounting principle for inventories
in conformity with Accounting Principles Board Opinion No. 20.
Yours very truly,
/s/ Price Waterhouse
- - --------------------
PRICE WATERHOUSE
55
Exhibit 21
Subsidiaries of the Registrant
During fiscal 1993, the company had the following subsidiaries, all of which
are included in the consolidated financial statements incorporated in this
report:
AKOM, Ltd., a Cayman Islands, B.W.I. corporation (100% owned)
Tulstar Factors, Inc., a New York corporation (100% owned)
Dominion Stores, Inc., a Virginia corporation (100% owned)
Tultex International, Inc., a Virginia corporation (100% owned)
Logo 7, Inc., a Indiana corporation (100% owned)
Universal Industries, Inc., a Massachusetts corporation (100% owned)
Tultex Canada, Inc., a Canadian corporation (78% owned)
56
Exhibit 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
----------------------------------
We hereby consent to the incorporation by reference in the Registration
Statements on Form S-8 (Nos. 33-12394, 33-20194, 33-43596 and 33-52247)
of Tultex Corporaton of our report dated February 23, 1994 appearing on
page 18 of this 10-K. We also consent to the cncorporation by reference
of our report on the Financial Statement Schedules, which appears on page
F-1 of this Form 10-K.
/s/Price Waterhouse
- - -------------------
PRICE WATERHOUSE
Winston-Salem, North Carolina
April 15, 1994
57
Exhibit 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
----------------------------------
We consent to the incorporaton by reference in the registration statement on
Form 10-K of Tultex Corporation of our reports, dated March 19, 1992 on our
audits of the consolidated financial statements and consolidated financial
statements schedules of Universal Industries, Inc.
/s/ Coopers & Lybrand
- - ---------------------
COOPERS & LYBRAND
Boston, Massachusetts
April 15, 1994