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 December 31, 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
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Commission file number 1-8016
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TULTEX CORPORATION
(Exact name of registrant as specified in its charter)
Virginia 54-0367896
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(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
101 Commonwealth Boulevard, P. O. Box 5191, Martinsville, Virginia 24115
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 703-632-2961
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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
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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:
$131,799,861 at March 10, 1995.
(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.
29,806,793 shares of Common Stock, $1 par value, as of March 10, 1995
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 1995
Annual Meeting of Stockholders ("1995 Proxy Statement")
incorporated herein by reference in Part III, Items 10, 11, 12
and 13.
1
PART I
Item 1. Business
General
Tultex Corporation is one of the world's largest marketers and manufacturers
of activewear and licensed sports apparel for consumers and sports enthusiasts.
The company's diverse product line includes fleeced sweats, jersey products
(outerwear T-shirts), and decorated jackets and caps. These products are sold
under the company's own brands led by the Discus Athletic and Logo Athletic
premium labels and under private labels, including Nike, Levi Strauss, Reebok
and Pro Spirit. In addition, the company has numerous professional and college
sports licenses to manufacture and market embroidered and screen-printed
products with team logos and designs under its Logo Athletic and Logo 7 brands.
The company is a licensee of professional sports apparel, holding licenses from
the National Football League ("NFL"), Major League Baseball ("MLB"), the
National Basketball Association ("NBA") and the National Hockey League ("NHL")
to manufacture a full range of sports apparel for adults and children.
Historically, Tultex has been a producer of quality fleece products for sale to
distributors and resale to consumersunder private labels. However, in the
1980s, the activewear industry began to change. Increasing consumer demand
reflecting more active and casual lifestyles and the industry's historically
good long-term growth prospects and low fashionrisk as compared to other
apparel products, attracted large, well-financed companies which acquired
competitors of the company. Simultaneously, larger mass merchandise retailers
began to exert pressure on margins for lower-priced fleece products.
In recent years, Tultex has initiated a strategy to enhance its competitiveness
and to capitalize on growth opportunities by becoming a consumer-oriented
apparel maker able to compete in a changing industry. This strategy includes
the following elements:
Increasing Emphasis on Higher-Margin Products. The company is strengthening
its competitiveness in the activewear business through the development of
branded and private label, higher-quality and higher-margin products to
supplement its traditionally strong position in the lower-priced segment of the
business. The company is developing its own brands, promoting Discus Athletic
for its premium products and using the Tultex label for the value-oriented
segment of the market. Discus Athletic's highly visible advertising during
televised broadcasts of college football and basketball on the ESPN and ABC
television networks and of Atlantic Coast Conference basketball has contributed
to significant annual increases in sales of this brand since 1992. In addition,
Tultex has partnering arrangements to supply higher-quality, private label
products to companies such as Reebok, Levi Strauss and Nike, none of which
accounted for more than 10% of the company's consolidated sales during 1994.
To complement its development of higher-margin products, the company began
manufacturing jersey products in 1991.
Expanding into Licensed Apparel Business to Complement Activewear Business.
Tultex's 1992 acquisitions of Logo 7, a marketer of licensed sports apparel,
and Universal, a marketer of sports and entertainment licensed headwear,
enabled the company to achieve the fourth largest market share (13.7%) in
the higher-margin licensed apparel business in 1993, and have created
opportunities for significant manufacturing and distribution synergies with
the company's activewear business. The promotion of the Logo Athletic brand of
licensed apparel through television and print advertising, as well as
2
promotional arrangements featuring Dallas Cowboys' quarterback Troy Aikman, San
Francisco 49ers' quarterback Steve Young, Miami Dolphins' quarterback Dan
Marino, the Chicago Blackhawks' Chris Chelios and the Washington Bullets' Chris
Webber, among others, has helped to increase the visibility and sales of Logo
Athletic products.
Increasing Distribution Channels and Strengthening Customer Relationships.
Tultex actively pursues strong relationships with department, sporting goods
and other specialty stores, such as Sears, JC Penney, Modell's, Dillard's,
Foot Locker, Champs and Sports Authority, to distribute its higher margin
branded and private label products. In addition, the company continues to
strengthen its relationships with high volume retailers such as Wal-Mart,
Kmart and Target by supplying private label and Tultex products. Tultex
provides customers with exceptional service and support; as an example, its
distribution capabilities are highly responsive to customers' changing
delivery and inventory management requirements.
Investing in Modern Distribution and Production Facilities. During fiscal
1988 through fiscal 1994, Tultex invested approximately $191 million in
capital expenditures, primarily in the construction of its customer service
center and in high-efficiency spinning, knitting, dyeing, cutting and
embroidering machinery. In 1991, Tultex began operating the customer service
center, which the company believes is the most highly automated in the
industry. Having made significant investments in its distribution and
production facilities, the company's average capital expenditures are not
expected to exceed approximately $20 million annually through 1997.
The company's strategy has improved its sales mix. While net sales increased
6.0% in fiscal 1994 over 1993, net sales of Discus Athletic activewear and
premium private label sweats under the Nike, Levi Strauss and Reebok names
increased 49.8% to $77.6 million and net sales of Logo Athletic licensed
apparel increased 198.6% to $64.5 million. Sales of jersey products were $56.8
million for the fiscal year ended December 31, 1994, representing 16.5% of the
company's activewear sales during such period compared to 11.6% for fiscal
1993. Reduced consumer demand for activewear and an oversupply of activewear
in retail inventories in the first half of 1994, the MLB strike, the NHL
lockout and higher raw material costs adversely affected Tultex's results of
operations during 1994.
The company's activewear business is vertically integrated, spinning
approximately 80-85% of the yarn it requires in three yarn plants located in
North Carolina (the balance is purchased under yarn supply contracts) and
knitting, dyeing and cutting fabric and sewing finished goods in 11 plants
in Virginia and North Carolina and one plant in Jamaica. The company's
licensed sports apparel operations are conducted from one plant in Indiana and
one plant in Massachusetts.
Industry
The Company produces activewear and licensed sports apparel and headwear for
sale at a broad range of price points through all major distribution channels.
Activewear
The company's activewear business consists of its fleecewear and jersey pro-
ducts. All activewear industry and market share data included herein has been
estimated by the company based on data provided by Market Research Corporation
of America, a leading provider of market information on the textile industry.
3
Fleecewear.
The fleecewear industry, with retail sales of approximately $9.1 billion in
1993, has grown 12.8% in unit sales from 1989 to 1993 and has experienced a
3.1% compound annual growth rate in unit sales during this period. The
predominant fleecewear products are sweatshirts, pants and shorts.
Jersey (Outerwear T-shirts). Unit retail sales of jersey products have grown
32.6% from 1989 to 1993 and in 1993 totaled $6.7 billion, or 66 million units.
Like fleecewear, the industry characteristics of jersey apparel include low
fashion rish and long-term growth. Imports are a greater threat as the weight/
labor ratio and the freight costs involved are lower for jersey products than
for fleecewear; however, the ability to produce large volumes with short
delivery times gives domestic manufacturers an advantage over import
competition in both fleecewear and jersey apparel.
Licensed Apparel and Headwear
Estimated wholesale sales of professional sports licensed apparel (including
headwear) for 1993 were approximately $1.9 billion, according to Sports Style
Magazine, an industry publication. In general, the company believes that the
prospects for its continued growth in this market are good, although growth is
expected to be less rapid than in recent years due to increased competition.
The continually changing fortunes of existing teams, together with new
franchises, has made the market extremely dynamic, as interest in each team
fluctuates with its performance. Manufacturers, such as the company, with the
capacity to respond quickly to these changes with new products and designs,
enjoy a competitive advantage over smaller competitors. The MLB players' strike
and the NHL lockout, which was settled on January 13, 1995, have adversely
affected sales of items bearing these marks, and the MLB players' strike will
continue to adversely affect sales of MLB products until this dispute is
resolved. The company expects that consumer demand for NHL products and, once
play resumes, MLB products will rebound, but may recover slowly. There can be
no assurance that the MLB dispute will be resolved in the near future or that
sales of MLB and NHL products will increase or return to prior levels.
Company Products
Activewear
The principal activewear products of the company are fleeced knitwear items
such as sweatshirts, jogging suits, hooded jackets, headwear and jersey
apparel for work and casual wear. The company manufactures apparel products
principally under the Discus Athletic and Tultex brands. Products carrying the
Discus Athletic name are marketed for sale to chains such as Foot Locker,
department stores such as Sears and sporting goods stores, while Tultex
products are marketed for sale to mass merchandisers such as Wal-Mart and
wholesale clubs such as Sam's. The company is licensed to manufacture and
market adult fleecewear under the Britannia trademark owned by Levi Strauss &
Co. The company also manufactures private-label products for sale under many
labels, including Nike, Levi Strauss, Reebok and Pro Spirit.
Licensed Apparel and Headwear
The company's licensed apparel products include jackets, sweats, T-shirts,
baseball-style caps and other headwear, embroidered or imprinted with
professional and college sports and entertainment-related licensed designs and
logos. These products are marketed under the Logo Athletic and Logo 7 brands.
4
Under the Logo Athletic name, the company offers premium-quality jackets,
caps and other activewear, including NFL "Pro-Line" authentic sideline gear
and NBA "Authentics" apparel. Tultex, through Logo 7, acquired Pro-Line status
from the NFL in 1993, a flagship program entitling the company to sell products
identical to those worn on the sidelines by NFL players and coaches. Under the
terms of the nonexclusive four-year Pro-Line contract, the company markets
Pro-Line products at retail for all 30 NFL teams. Under the terms of the
nonexclusive three-year NBA Authentics contract, the company markets products
that are identical to those worn by NBA players, coaches and managers during
competition. The company's NFL Pro-Line and NBA Authentics products
prominently feature the Logo Athletic name and trademark, which the company
believes are key elements in developing the Logo Athletic brand. Under the
Logo 7 brand, the company offers moderately-priced outerwear, fleecewear,
T-shirts and caps with licensed designs and logos. The company also sells
popularly-priced licensed fleecewear, jersey apparel and headwear.
Customers; Marketing and Sales
Customers
The company offers a diverse product line for sale at a full range of price
points through all major distribution channels. During 1994, one customer of
the company accounted for approximately 10.4% of sales, and the, company's
top four customers together accounted for approximately 30.4% of sales.
Marketing and Sales
The company has shifted its marketing strategy in recent years to focus on the
development of its own brands and sales through distribution channels that
support higher margins. In particular, the company has devoted significant
resources to the promotion of its Discus Athletic and Logo Athletic brands. In
1993, the company began conducting advertising campaigns to promote its Discus
Athletic and Logo Athletic brands. The Discus Athletic advertising campaign
emphasizes quality and the usefulness of the product for many sports. The
company believes that this positioning effectively differentiates the Discus
Athletic line from competing specialized lines with powerful brand
associations. The Logo Athletic campaign focuses on establishing the
"authenticity" of Logo Athletic products. The company believes that licensed
apparel sales benefit substantially from the perception that products are the
same as those worn by professional sports stars.
Advertising expenditures were $12.3 million and $17.1 million in 1993 and 1994,
respectively, of which $10.0 million and $14.7 million, respectively, were
expensed in those years. The advertising expense budget for 1995 is $21.8
million.
New product introductions are important to the company's licensed apparel
business and are undertaken to generate consumer excitement and demand.
Logo 7's creative design team, in cooperation with key customers and licensors,
continually develops and introduces new products and styles. For example, the
"shark's tooth" design featured on certain Logo Athletic caps and jackets has
been extremely successful and is in high demand. The company is able to react
quickly to changing team fortunes, designing new products to capitalize on
shifts in popularity and delivering those products to the market rapidly,
sometimes in a matter of hours. During major professional and collegiate
sporting events, such as the Super Bowl, the company produces on-site decorated
products with championship logos of the winning teams for immediate
distribution and sale at the event.
5
The company's marketing methods for other products 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.
As of December 31, 1994, Tultex operated a sales office in each of New York,
Boston, Chicago, Seattle, Orlando and Los Angeles and a Discus Athletic
showroom in New York City. These offices are the primary points of contact for
customers and coordinate sales, distribution of sales information, certain
advertising, point-of-sale displays and customer service. The company also
employs eight independent sales representatives to market its Discus Athletic
line in the fragmented sporting goods market. Logo 7's products are marketed
through a sales force of 50 people, including Logo 7 employees and independent
sales representatives. In 1992, the company entered into an agreement with
Nissan Trading Co., Ltd., a subsidiary of Nissan Motor Co., to market and sell
the company's Discus Athletic products in Japan. International sales in 1993
and 1994 were insignificant.
At December 31, 1994, Dominion Stores, Inc., a wholly-owned subsidiary,
operated 14 outlet stores in North Carolina, Virginia and West Virginia, which
sell surplus company apparel and apparel items of other manufacturers, and
operated 32 The Sweatshirt Company retail stores in 19 states, which primarily
sell first-quality company-made products and accessories. Dominion Stores'
total sales in fiscal 1994 were $18.7 million.
Licenses
Most of the company's licensed products are sold through Logo 7. The company
is a licensee of professional sports apparel, maintaining a full complement of
licenses with all of the major North American professional sports leagues --
the NFL, MLB, the NBA and the NHL -- and the Collegiate Licensing Company. The
company also holds licenses for World Cup Soccer 1994, NASCAR, the 1996 Summer
Olympics in Atlanta and entertainment-related products. These licenses require
the payment of royalties ranging from 5% to 15% of sales with guaranteed
royalties of approximately $9 million in fiscal 1995. The company's major
licenses with the NFL, NBA and NHL expire in 1997 and the MLB license expires
in 1995. The company is licensed to manufacture and market adult fleecewear
under the Britannia(registered trademark) trademark owned by Levi Strauss & Co.
The company's ability to compete is dependent on its ability to obtain and
renew licenses, particularly those from the major professional sports leagues.
The company enjoys long-standing relationships with its major league licensees,
having been awarded its first licenses with the NFL in 1971, with the NBA in
1977, with MLB in 1980 and with the NHL in 1988. The company has no reason to
believe that it will not be able to successfully renew these licenses. While
the company has enjoyed long, successful and uninterrupted licensing
relationships with its professional and collegiate athletic licensors, if a
significant license or licenses were not renewed or replaced, the company's
sales would likely be materially and adversely affected. In addition, the
company's material licenses are nonexclusive and new or existing competitors
may obtain similar licenses.
6
Manufacturing
The company's manufacturing process consists of: yarn production; fabric
construction including knitting, dyeing and finishing operations; apparel
manufacturing including cutting and sewing operations; and, for garments with
logos, screenprint and embroidery operations. As a result of its modernization
efforts, the company believes that its manufacturing facilities are outfitted
with some of the most efficient and technologically-advanced equipment in the
industry.
During fiscal 1988 through fiscal 1994, the company invested approximately $191
million to open new facilities, including sewing facilities in Roanoke,
Virginia and Montego Bay, Jamaica (a leased facility), and the highly automated
customer service center in Martinsville, Virginia, and to modernize other
facilities. Open-end spinning frames were acquired to increase yarn production
and reduce costs, higher color quality and lower dyeing costs were achieved
from the installation of new jet dyeing equipment, new dryers were added in the
fabric finishing process, automated cutting machines were introduced, and new
information systems were implemented.
Tultex's highly-automated customer service center, opened in 1991, has greatly
expanded the company's distribution capabilities. The customer service center
allows the company to package and ship its products according to the more
detailed color, size and quantity specifications typically required by
high-margin retailers and department stores and has permitted consolidation of
the company's warehouses. However, the customer service center currently is
underutilized during the first half of the year and has significantly
contributed to the company's fixed costs. Management believes that its
strategy of increasing sales of higher-margin retail products, which require
more sophisticated packaging, will result in improved utilization of the
customer service center.
In spring 1992, Logo 7 moved its operations to a newly-constructed, leased
facility built to Logo 7's specifications. This 650,000 square foot building
allowed Logo 7 to centralize operations, increase inventory control, improve
material flow and will allow for future expansion.
Tultex manufactures yarn at three facilities located in North Carolina, which
have a combined production capacity of 1.3 million pounds per week, utilizing
modern, open-end spinning frames. For its knitting operations, Tultex operates
approximately 500 modern high-speed, latch-needle circular knitting machines,
which produce various types of fabrics. The company believes its dyeing
operations are among the most modern and technologically efficient in the
industry; dyeing operations are computer-controlled, allowing precise
duplication of dyeing procedures to ensure "shade repeatability" and color-fast
properties. The finishing operations employ mechanical squeezing and steaming
equipment.
The Martinsville cutting facility uses advanced Bierrebi automatic continuous
cutting machines with computer-controlled hydraulic die-cutting heads and
"lay-up" machines and high-speed reciprocating knives. Sewing production at the
company's nine sewing facilities is organized on an assembly-line basis.
7
The company has incorporated sophisticated systems into several key areas of
the manufacturing process. The company relies on a knitting ticket system to
track and report the manufacturing process from yarn inventory through the
knitting of individual rolls of fabric into greige cloth storage. From this
point, the shop floor control module of the Cullinet manufacturing system
monitors and reports the movement of each production lot through the operations
of dyeing, finishing, cutting and sewing. Each sewing plant then electronically
transmits an advance shipping notice to the automated customer service center
so the distribution planning module at the center can plan the arrival and
storage/packing of the sewn garments. Frontier knitting monitor systems,
cutting production systems, and sewing production systems use computer-based
data collection on each knitting, cutting, and sewing machine to monitor
machine and operator efficiency, data that is useful for quality control,
incentive-based payroll data, and production management information.
The company decorates its unfinished licensed apparel products using
screenprinting or embroidery at Logo 7's facilities in Indianapolis and
Universal's facilities in Massachusetts. Automatic silkscreen machines and
dryers are used for longer runs, and hand-operated presses are used for
shorter or more complicated runs. Embroidery is applied using high-speed,
computerized stitching equipment.
The company's order backlog at December 31, 1993 was approximately $67 million
and at December 31, 1994 was approximately $143 million. Backlogs are computed
from orders on hand at the last day of each fiscal period. The company believes
that due to the seasonality of the company's business and the just-in-time
nature of much of the company's sales, order backlogs are not a reliable
indicator of future sales volume.
Raw Materials
The company's principal raw materials for the production of activewear are
cotton and polyester. Cotton content in fleecewear typically is 50% and in
jersey apparel typically is 100%. The company is producing increasing amounts
of fleecewear containing 90-100% cotton. Fleecewear and jersey manufacturers
are extremely sensitive to fluctuations in cotton and polyester prices as these
materials represent approximately 30% of the manufacturing cost of the product.
In addition, the company is indirectly impacted by increasing costs of raw
materials in its licensed apparel business because the company purchases
finished goods containing cotton and polyester and these higher raw materials
costs often are effectively passed on to the company. Cotton prices increased
significantly in 1994 over 1993 levels. In 1994, the company's average price
per pound of cotton was $0.72, compared with $0.60 in 1993, while the average
price per pound of polyester was $0.64 in 1994, compared with $0.67 in 1993.
The company expects the average price paid for cotton and polyester to be
higher in 1995. To the extent cotton prices increase before the company fixes
the price for the remainder of its raw cotton needs, the company's results of
operations could be adversely affected.
Trademarks
The company increasingly promotes and relies upon its trademarks, including
Discus Athletic, Logo Athletic, Tultex, and Logo 7, which are registered in
the United States and many foreign countries.
8
Seasonality
The company's business is seasonal. The majority of fleecewear sales occur in
the third and fourth quarters, coinciding with cooler weather and the playing
seasons of popular professional and college sports. Jersey sales peak in the
second and third quarters of the year, somewhat offsetting the seasonality of
fleecewear sales.
Environmental Matters
The company is subject to various federal, state and local environmental laws
and regulations governing, among other things, the discharge, storage, handling
and disposal of a variety of substances and wastes used in or resulting from
its operations, including, but not limited to, the Water Pollution Control Act,
as amended; the Clean Air Act, as amended; the Resource Conservation and
Recovery Act, as amended; the Toxic Substances Control Act, as amended; and the
Comprehensive Environmental Response, Compensation and Liability Act of 1980,
as amended.
The company returns dyeing wastes for treatment to the City of Martinsville,
Virginia's municipal wastewater treatment systems operated pursuant to a
permit issued by the state. The city has filed a timely application to renew
its permit. 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
and disposed of as a non-hazardous waste in the city's landfill. To cover the
cost to the city, the company pays 50 to 80 cents per thousand gallons of water
above regular water costs. The expenditures required do not have a material
effect on the company's earnings or competitive position.
The company's operations also are governed by laws and regulations relating to
employee safety and health, principally the Occupational Safety and Health Act
and regulations thereunder, which, among other things, establish exposure
limitations for cotton dust, formaldehyde, asbestos and noise, and regulate
chemical and ergonomic hazards in the workplace.
The company believes that it is in material compliance with the aforementioned
laws and regulations and does not expect that future compliance will have a
material adverse effect on its capital expenditures, earnings or competitive
position in the foreseeable future. However, there can be no assurances that
environmental and other legal requirements will not become more stringent in
the future or that the company will not incur significant costs in the future
to comply with such requirements.
Employees
The company had approximately 6,933 employees at December 31, 1994, of which
6,043 or 87% were paid hourly.
9
In August 1994, hourly employees at the company's Martinsville, Virginia
facilities voted for representation by the Amalgamated Clothing and Textile
Workers Union. The company accepted a three-year labor contract with the
union which covers all hourly employees at the Martinsville facilities. (1)
As of December 31, 1994, the company's approximately 2,200 hourly employees in
Martinsville accounted for approximately 32% of the company's total employees
and approximately 36% of the company's hourly employees. None of the
company's other employees are represented by a union.
(1) It was ratified by an employee vote on March 26, 1995.
Item 2. Properties
Most of the company's principal physical facilities (other than those of Logo
7 and Universal) are located in Virginia and North Carolina, within a 150-mile
radius of the City of Martinsville. 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 location, approximate size and use of the company's
principal owned properties are summarized in the following table:
Square
Location Footage Use
-------- ------- ------
Martinsville, VA 45,200 Administrative offices
Martinsville, VA 1,100,000 Manufacturing and distribution (apparel)
Koehler, VA 60,000 Warehousing
Martinsville, VA 70,000 Warehousing
South Boston, VA 130,000 Sewing (apparel)
Bastian, VA 53,500 Sewing (apparel)
Longhurst, NC 287,000 Manufacturing (yarn)
Roxboro, NC 110,000 Manufacturing (yarn)
Dobson, NC 38,000 Sewing (apparel)
Mayodan, NC 612,000 Manufacturing, warehousing and shipping
(yarn and apparel)
Vinton, VA 50,000 Sewing (apparel)
Martinsville, VA 502,200 Warehousing and shipping (apparel)
Mattapoisett, MA 116,250 Distribution (headwear)
10
The following table presents certain information relating to the company's
principal leased facilities:
Lease
Expira- Current
Square tion Annual
Location Footage Date Rental Use
-------- ------- ------- ------- ---
Chilhowie, VA 40,015 08/31/97 $ 46,200 Sewing (apparel)
Montego Bay, 66,000 Monthly 266,040 Sewing (apparel)
Jamaica
Marion, NC 48,760 11/02/98 95,000 Sewing (apparel)
Martinsville, VA 31,000 Monthly 18,700 Warehousing (apparel)
Martinsville, VA 300,000 06/01/98 684,000 Warehousing (apparel)
Martinsville, VA 500,000 06/01/98 978,000 Warehousing (apparel)
Indianapolis, IN 650,000 04/30/07 1,404,000 Manufacturing (apparel)
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 and automated
storage/retieval equipment. This machinery is modern and kept in good repair.
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 needs.
Item 3. Legal Proceedings.
None.
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 February 28, 1995 there were 3,413 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 24 and in "Note
7" of "Notes to Financial Statements" on page 12 of the company's 1994 Annual
Report to Stockholders.
11
Item 6. Selected Financial Data.
The following table presents selected financial data 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 interest, and to reflect a change in
accounting method from LIFO to FIFO.
1994 1993 1992 1991 1990
In thousands of dollars except per share data) (52 weeks) (52 weeks) (53 weeks) (52 weeks) (52 weeks)
---------- ---------- ---------- ---------- ----------
Summary of Operations:
Net sales and other income $ 565,433 $ 533,611 $ 503,946 $ 349,910 $ 390,336
Costs and operating expenses 532,847 507,524 470,155 330,079 351,228
---------- ---------- ---------- ---------- ----------
Operating income 32,586 26,087 33,791 19,831 39,108
Interest expense 18,151 16,996 13,540 9,064 8,838
---------- ---------- ---------- ---------- ----------
Income before income taxes and cumulative effect
of a change in accounting principle 14,435 9,091 20,251 10,767 30,270
Provision for income taxes 5,485 3,188 7,060 3,443 11,097
---------- ---------- ---------- ---------- ----------
Income before cumulative effect of a
change in accounting principle 8,950 5,903 13,191 7,324 19,173
Cumulative effect of a change in
accounting principle - - - 2,848 -
---------- ---------- ---------- ---------- ----------
Net Income 8,950 5,903 13,191 10,172 19,173
Less preferred dividend requirement 1,135 1,135 1,041 10 13
---------- ---------- ---------- ---------- ----------
Balance to common stock $ 7,815 $ 4,768 $ 12,150 $ 10,162 $ 19,160
========== ========== ========== ========== ==========
Weighted average number of common
shares outstanding* 29,685 28,961 28,872 28,862 28,901
========== ========== ========== ========== ==========
Shares outstanding at year end* 29,807 29,053 28,878 28,862 28,860
========== ========== ========== ========== ==========
Per common share*:
Income before cumulative effect of a
change in accounting principle $ .26 $ .16 $ .42 $ .25 $ .66
Net income $ .26 $ .16 $ .42 $ .35 $ .66
========== ========== ========== ========== ==========
Dividends declared (Note 7) $ .05 $ .20 $ .20 $ .32 $ .36
========== ========== ========== ========== ==========
Book value $ 5.74 $ 5.64 $ 5.67 $ 5.44 $ 5.37
========== ========== ========== ========== ==========
12
1994 1993 1992 1991 1990
In thousands of dollars except per share data) (52 weeks) (52 weeks) (53 weeks) (52 weeks) (52 weeks)
---------- ---------- ---------- ---------- ----------
Year-end Data:
Current assets $ 289,907 $ 288,691 $ 249,327 $ 171,692 $ 176,611
Current liabilities 167,053 45,138 122,610 86,681 84,179
---------- ---------- ---------- ---------- ----------
Working capital $ 122,854 $ 243,553 $ 126,717 $ 85,011 $ 92,432
========== ========== ========== ========== ==========
Inventories $ 130,183 $ 157,278 $ 130,166 $ 89,368 $ 98,748
Property, plant and equipment (net) 134,884 151,775 153,188 140,426 150,372
Total assets 456,809 474,965 435,818 314,957 328,643
Bank notes payable 1,000 - 79,825 55,762 43,299
Current portion of long-term debt 132,353 8,524 2,268 2,443 3,812
========== ========== ========== ========== ==========
Capital Invested:
Long-term debt $ 83,002 $ 230,914 $ 118,438 $ 56,827 $ 75,958
Stockholders, equity 187,101 179,197 178,793 157,091 155,301
---------- ---------- ---------- ---------- ----------
Total capital invested $ 270,103 $ 410,111 $ 297,231 $ 213,918 $ 231,259
========== ========== ========== ========== ==========
Return on average total capital invested 2.6% 1.7% 5.2% 4.6% 8.4%
Long-term debt as a percentage of total capital 30.7% 56.3% 39.8% 26.6% 32.8%
========== ========== ========== ========== ==========
*As adjusted for stock splits, stock dividends and shares issued in pooling-
of-interests acquisition of Universal Industries, Inc. in 1992.
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
Financial results for the first six months of fiscal 1992 have been restated
to include Universal Industries, Inc., acquired by the company in June 1992
through an exchange of stock accounted for as a pooling of interests. 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 fiscal 1993. This change has been applied
retroactively by restating all prior periods presented.
13
Results of Operations
The following table presents the company's consolidated income statement items
as a percentage of sales.
Dec. 31, 1994 Jan. 1, 1994 Jan. 2, 1993
(52 weeks) (52 weeks) (53 weeks)
------------- ------------ ------------
Net sales and
other income 100.0% 100.0% 100.0%
Cost of
products sold 74.2 74.1 73.0
Depreciation 4.2 4.4 4.2
Selling, general
and administrative 16.5 16.6 16.1
Gain on sale of
facilities (0.7) - -
Interest 3.2 3.2 2.7
------------- ------------ ------------
Total costs and
expenses 97.4 98.3 96.0
------------- ------------ ------------
Income before taxes 2.6 1.7 4.0
Provision for
income taxes 1.0 0.6 1.4
------------- ------------ ------------
Net income 1.6% 1.1% 2.6%
============= ============ ============
Note: Certain items have been rounded to cause the columns to add to 100%.
Fiscal Year 1994 Compared to Fiscal Year 1993 Net Sales and Other Income for
the year ended December 31, 1994 increased $31.8 million or 6% over the prior
year, from $533.6 million to $565.4 million, attributable primarily to
increased sales volume in the activewear and licensed headwear lines. These
increases were partially offset by a decrease in other licensed apparel sales
due to the Major League Baseball strike and the National Hockey League lockout,
and to some general weakening in the licensed sports apparel marketplace.
Activewear sales in fiscal 1994 increased $24.3 million or 7.6% over fiscal
1993 from $320.1 million to $344.4 million, and licensed apparel headwear sales
increased $16.2 million or 31% over fiscal 1993 from $52.2 million to $68.4
million. Sales of other licensed sports apparel decreased by $8.7 million or
5.4% in fiscal 1994 compared with 1993 from $161.3 million to $152.6 million.
Sales of Discus Athletic(registered trademark) activewear and premium private
label sweats under the Nike, Levi Strauss and Reebok names increased 49.8% to
$77.6 million and sales of Logo Athletic(registered trademark) licensed apparel
increased 198.6% to $64.5 million. Sales of jersey products were $56.8 million
for the fiscal year ended December 31, 1994, representing 16.5% of the
company's activewear sales during such period compared to 11.6% for fiscal
1993.
14
Cost of Products Sold as a percentage of sales in fiscal 1994 remained
relatively unchanged from 1993, increasing from 74.1% to 74.2%. Continuing
efficiency improvements and overhead reductions during 1994 helped contain
total costs. Costs were contained notwithstanding growth of jersey volume,
which typically produces lower margins, increased raw material costs and
product improvements. Utilization of the company's manufacturing and
distribution facilities improved in the second half of 1994 as a result of
the increased demand for activewear. Raw material costs were higher in 1994
than in 1993 as a result of the increased price of raw cotton. Cotton prices
fluctuate based on the relationship between supply and demand, with prices
increasing as demand increases and/or supply decreases. The supply of cotton
can be adversely affected by weather, crop disease or other factors. Although
cotton and polyester prices are expected to be higher and cotton supply may
be limited in 1995, the company has contracted to purchase substantially all
of its raw cotton needs for 1995 and fixed the price on approximately 50% of
its raw cotton needs. To the extent cotton prices increase before the company
fixes the price for the remainder of its raw cotton needs, the company's
results of operations could be adversely affected.
Depreciation expense as a percentage of sales was 4.2% for fiscal 1994 and
4.4% for fiscal 1993. Depreciation expense in 1994 increased by $0.6 million
or 2.6% over 1993 from $23.4 million to $24 million, due to fixed asset
additions.
Selling, General and Administrative ("S,G&A") expenses increased $5.1 million
in 1994. As a percentage of net sales, S,G&A expenses were 16.5% in 1994 and
16.6% in 1993. Higher S,G&A expenses in 1994 resulted from higher advertising
costs and sales commissions in activewear lines, especially relating to the
company's Discus Athletic brand, and higher royalties in the licensed apparel
lines.
In December 1994, the company sold its yarn spinning plant located in
Rockingham, North Carolina, which generated a pretax gain of $4.4 million.
The company separately agreed to purchase from the buyer 20 million pounds of
cotton-polyester blended yarns over the next three years at market terms. The
company's yarn purchase requirements are expected to exceed this amount.
Interest expense as a percentage of sales was 3.2% for both 1994 and 1993.
Interest expense increased $1.2 million or 7.1% in 1994 over 1993, from $17
million to $18.2 million, primarily as a result of higher average borrowings
to finance working capital requirements. The nature of the company's business
requires extensive seasonal borrowings to support its working capital needs.
As of October 6, 1993, the company entered into a $225 million revolving
credit facility, which replaced its short-term credit lines. During fiscal
1993, working capital borrowings averaged $133.9 million at an average rate
of 3.8%. During fiscal 1994, under the revolving credit facility, average
borrowings and interest rate were $155.3 million and 5.2%, respectively.
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 38% in 1994 and 35% in 1993. The
provision for income taxes as a percentage of net sales increased to 1% in
fiscal 1994 from 0.6% in fiscal 1993, an increase of $2.3 million. The
increase in provision for income taxes was due to higher pretax earnings and
higher effective federal and state income tax rates.
15
Fiscal Year 1993 Compared to Fiscal Year 1992 Net Sales and Other Income for
fiscal 1993 increased $29.7 million or 5.9% over 1992 from $503.9 million to
$533.6 million. The 1993 sales growth was due to a 23.7% increase in licensed
apparel sales partially offset by lower activewear sales. Unit sales volume
of activewear apparel in 1993 was relatively unchanged from the prior year's
level, while the average selling price of activewear apparel decreased by
approximately 2% from 1992. The 1993 average price decline of activewear
products was primarily due to proportionately higher shipping volume of
jersey products, which sell at lower prices than fleece garments.
Cost of Products Sold as a percentage of sales increased from 73% for 1992 to
74.1% for 1993. The increase was primarily due to heavier fabric weights,
greater sewing detail for activewear products, strong licensed apparel sales
growth with mass merchandisers which sales generally yield lower margins, and
expenses associated with streamlining operations. The increase in jersey
sales, which traditionally yield lower margins than fleece, also increased
cost of products sold as a percentage of sales. Apparel production for 1993
decreased 2.5% from 1992.
Depreciation expense as a percentage of sales increased to 4.4% for 1993 from
4.2% for 1992. Depreciation expense increased $2.6 million or 12.5% over 1992
from $20.8 million to $23.4 million. The 1993 increase was primarily due to
expenditures for machinery and equipment.
Selling, General and Administrative expenses increased as a percentage of
sales from 16.1% in 1992 to 16.6% in 1993. The primary reason for the S,G&A
expense increase was an approximately $5 million increase in royalty expenses
related to higher sales of professional sports licensed apparel.
Interest expense was 3.2% of sales for 1993 compared to 2.7% for 1992.
Interest expense increased $3.5 million or 25.9% in 1993 compared to 1992
from $13.5 million to $17 million primarily due to higher indebtedness from
increased working capital needs and the acquisition of Logo 7. The company
experienced increased working capital needs in 1993 due to higher inventory
levels and extended payment terms for some customers.
Provision for Income Taxes reflects an effective rate for combined federal
and state income taxes of 35% in 1993 and 1992.
Financial Condition, Liquidity and Capital Resources
Net working capital at December 31, 1994 decreased $120.7 million or 49.5% to
$122.9 million from $243.6 million at January 1, 1994, primarily due to the
reclassification of $104 million of borrowings under the company's existing
revolving credit facility from long-term debt to current maturities. Net
accounts receivable increased $23.4 million from January 1, 1994 to
December 31, 1994 due to higher activewear sales in the fourth quarter of
1994 versus the comparable period in 1993.
Inventories traditionally increase during the first half of the year to
support second-half shipments. In 1994, inventories peaked on July 2 at
$206.5 million and then dropped to $130.2 million at December 31. As of
December 31, 1994, inventories had decreased by approximately $27.1 million
or 17.2% from January 1, 1994, while sales had increased 6% in fiscal 1994
versus fiscal 1993.
16
Borrowings under the company's revolving credit facility, amounting to $104
million at December 31, 1994, were reclassified from long-term debt to current
maturities because the credit facility terminates in October 1995. The current
ratio (ratio of current assets to current liabilities) at December 31, 1994
was 1.7 compared to 6.4 at January 1, 1994. The decrease in the current ratio
was due mainly to higher current maturities of debt.
On October 6, 1993, the company began operating with a two-year $225 million
revolving credit facility which replaced the company's short-term credit
lines. Total indebtedness at December 31, 1994 consisted primarily of the
8 7/8% notes totaling $95 million, $104 million outstanding under the
revolving credit facility and $16 million due under the term loan. The
company's average credit facility borrowings during fiscal 1994 were $155.3
million and its peak borrowing was $192 million at October 1, 1994. Current
maturities included $19 million of the 8 7/8% notes, a total of $9 million,
due in equal quarterly payments of approximately $2 million each, under the
term loan and $104 million of borrowings under the revolving credit facility.
As of December 31, 1994, the company was in compliance with, or had obtained
waivers for violations of, all debt covenants.
The company has filed a Registration Statement on Form S-1 with the Securities
and Exchange Commission to offer to the public an aggregate of $110,000,000
principal amount of senior notes due 2005. Net proceeds from this offering and
borrowings under the new senior credit facility will be used to repay in full
the 8 7/8% notes and the term loan. The company believes that the longer
maturities and the increased covenant flexibility provided under the terms of
the notes will allow the company to continue to increase its long-term
investment in brand promotion and higher-margin products.
In fiscal 1994, net cash provided by operations was $24.6 million compared to
cash used by operations of $5.9 million in fiscal 1993. The reduced need for
operating cash was due to reduced inventory partially offset by higher
accounts receivable. Cash used for capital expenditures decreased $13.7
million or 61.4% for fiscal 1994 compared to 1993 from $22.3 million to $8.6
million. The company has budgeted approximately $15 million for capital
expenditures in fiscal 1995. Cash used by financing activities was $24.1
million for fiscal 1994 compared to cash provided by financing activities of
$33.4 million in fiscal 1993 as a result of reduced borrowing requirements.
The company expects that its short-term borrowing needs will be met through
cash generated from operations and borrowings under the new, three-year senior
credit facility. In addition, the notes will require no scheduled principal
repayments until their maturity in 2005.
Stockholders' Equity increased $7.9 million during fiscal 1994 primarily due
to net income for the period of $9 million and $0.7 million net proceeds from
a new employee stock purchase plan. This increase was partially offset by cash
dividends of $1.8 million. On April 13, 1994, the Board of Directors suspended
further dividend payments. Substantially contemporaneously with the
consummation of the senior notes offering, the company expects to pay existing
dividend arrearages on its preferred stock and thereafter to resume paying
quarterly dividends thereon. No decision with respect to renewal of common
stock dividends has been made. Accumulated dividends on the company's 5%
cumulative preferred stock and cumulative convertible preferred stock, $7.50
Series B totaled $851,000 at December 31, 1994.
17
Item 8. Financial Statements and Supplementary Data.
TULTEX CORPORATION
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page
----
Consolidated Statements of Income 18
Consolidated Balance Sheets 19
Consolidated Statements of Cash Flows 21
Consolidated Statements of Changes in Stockholders' Equity 22
Notes to Consolidated Financial Statements 24
Report of Independent Public Accountants 43
18
Tultex Corporation
Consolidated Statements of Income
(In thousands of dollars except per share data)
Fiscal years ended: Dec. 31, 1994 Jan. 1, 1994 Jan. 2, 1993
(52 weeks) (52 weeks) (53 weeks)
------------- ------------ ------------
Net sales and other income $ 565,433 $ 533,611 $ 503,946
Costs and expenses:
Cost of products sold 419,769 395,727 368,027
Depreciation 23,973 23,364 20,831
Selling, general
and administrative 93,510 88,433 81,297
Gain on sale of facilities (4,405) - -
Interest 18,151 16,996 13,540
------------- ------------ ------------
Total costs and expenses 550,998 524,520 483,695
------------- ------------ ------------
Income before income taxes 14,435 9,091 20,251
Provision for income taxes
(Note 9) 5,485 3,188 7,060
------------- ------------ ------------
Net Income $ 8,950 $ 5,903 $ 13,191
============= ============ ============
Net Income per Common Share $ .26 $ .16 $ .42
============= ============ ============
Dividends per Common Share
(Note 7) $ .05 $ .20 $ .20
============= ============ ============
The accompanying Notes to Financial Statements are an integral part of this
statement.
19
Tultex Corporation
Consolidated Balance Sheets
(In thousand of dollars except share data)
Assets Dec. 31, 1994 Jan. 1, 1994
------------- ------------
Current assets:
Cash and equivalents (Note 5) $ 5,776 $ 6,754
Accounts receivable, less allowance
for doubtful accounts of $2,115
(1994) and $2,374 (1993) 139,743 116,383
Inventories (Note 3) 130,183 157,278
Prepaid expenses 14,205 8,276
------------- ------------
Total current assets 289,907 288,691
------------- ------------
Property, plant and equipment,
net of depreciation (Note 4) 134,884 151,775
Intangible assets 26,766 27,983
Other assets 5,252 6,516
------------- ------------
Total Assets $ 456,809 $ 474,965
============= ============
20
Liabilities and Stockholders, Equity Dec. 31, 1994 Jan. 1, 1994
------------- ------------
Current liabilities:
Notes payable to banks (Note 5) $ 1,000 $ -
Current maturities of long-term debt
(Notes 6 and 19) 132,353 8,524
Accounts payable - trade 19,634 18,170
Accrued liabilities - other 11,102 13,923
Dividends payable (Note 7) - 1,736
Income taxes payable 2,964 2,785
------------- ------------
Total current liabilities 167,053 45,138
------------- ------------
Long-term debt, less current maturities
(Notes 6 and 19) 83,002 230,914
Deferrals:
Deferred income taxes (Note 9) 14,893 14,014
Other 4,760 5,702
------------- ------------
Total deferrals 19,653 19,716
------------- ------------
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 (1994 and 1993) 198 198
Series B, $7.50 cumulative convertible preferred
stock; authorized, issued and outstanding -
150,000 shares (1994 and 1993) 15,000 15,000
Common stock, $1 par value; authorized -
60,000,000 shares, issued and outstanding -
29,806,793 shares (1994) and 29,053,126
shares (1993) 29,807 29,053
Capital in excess of par value 5,279 1,889
Retained earnings 140,283 133,107
------------- ------------
190,567 179,247
Less notes receivable from stockholders 3,466 50
------------- ------------
Total stockholders' equity 187,101 179,197
------------- ------------
Commitments and contingencies
(Notes 12, 13, and 14)
Total Liabilities and Stockholders, Equity $ 456,809 $ 474,965
============= ============
The accompanying Notes to Financial Statements are an integral part of this
statement.
21
Tultex Corporation
Consolidated Statements of Cash Flows
(In thousands of dollars)
Fiscal years ended: Dec. 31, 1994 Jan. 1, 1994 Jan. 2, 1993
(52 weeks) (52 weeks) (53 weeks)
------------- ------------ ------------
Operating Activities:
Net income $ 8,950 $ 5,903 $ 13,191
Items not requiring (providing) cash:
Depreciation 23,973 23,364 20,831
Gain on sale of facilities (4,405) - -
Deferred income taxes 879 1,880 (234)
Amortization of excess of fair
value of assets acquired over cost - - (280)
Amortization of intangible assets 1,217 1,217 1,217
Other deferrals (942) 1,859 1,982
Changes in assets and liabilities:
Accounts receivable (23,360) (6,503) (17,685)
Inventories 27,095 (27,112) (25,461)
Prepaid expenses (5,929) (2,598) (2,227)
Accounts payable and accrued expenses (3,093) (790) 1,139
Income taxes payable 179 (3,113) 2,690
------------- ------------ ------------
Cash provided (used) by operating
activities (Notes 3, 6 and 9) 24,564 (5,893) (4,837)
Investing Activities:
Additions to property, plant and
equipment (8,624) (22,250) (30,330)
Change in other assets 1,264 (2,413) 113
Sales and retirements of property
and equipment 5,947 299 182
Acquisition of assets and certain
liabilities of Logo 7 - - (57,756)
------------- ------------ -----------
Cash used by investing activities (1,413) (24,364) (87,791)
Financing Activities:
Issuance (payment) of short-term
borrowings 1,000 (79,825) 24,063
Issuance of long-term debt 2,054 121,000 140,000
Payments of long-term debt (26,137) (2,268) (79,156)
Preferred stock issued - - 15,000
Cash dividends (Note 7) (1,774) (6,932) (6,690)
Proceeds from stock plans 728 1,433 201
------------- ------------ ------------
Cash provided (used) by financing
activities (24,129) 33,408 93,418
------------- ------------ ------------
Net increase (decrease) in cash and
equivalents (978) 3,151 790
Cash and equivalents at beginning
of year 6,754 3,603 2,813
-------------- ----------- ------------
Cash and Equivalents at End of Year $ 5,776 $ 6,754 $ 3,603
============== =========== ============
The accompanying Notes to Financial Statements are an integral part of this
statement.
22
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. 28, 1991,
as previously reported $ 198 $28,862 $ 580 $121,876 $ (184) $151,332
Adjustment for the cumulative effect on
prior years of applying retroactively
the new method of valuing inventories
(Note 3) 5,759 5,759
--------- --------- ------- --------- -------- ----------- --------
Balance as of Dec. 28, 1991,
as adjusted 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
Employee stock purchases 16 101 (30) 87
Collections - stockholders'
notes receivable 114 114
Cash dividends on common stock
($.20 per share) (Note 7) (5,649) (5,649)
Cash dividends on preferred
stock (Note 7) (1,041) (1,041)
--------- --------- ------- --------- -------- ----------- --------
Balance as of Jan. 2, 1993 198 15,000 28,878 681 134,136 (100) 178,793
Net income for the 52 weeks
ended Jan. 1, 1994 5,903 5,903
Employee stock purchases 175 1,208 (11) 1,372
Collections - stockholders'
notes receivable 61 61
Cash dividends on common stock
($.20 per share) (Note 7) (5,797) (5,797)
Cash dividends on preferred
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
23
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
--------- --------- ------- --------- -------- ----------- --------
Net income for the 52 weeks
ended Dec. 31, 1994 8,950 8,950
Employee stock purchases 754 3,390 (4,144) -
Collections - stockholders'
notes receivable 728 728
Cash dividends on common stock
($.05 per share) (Note 7) (1,490) (1,490)
Cash dividends on preferred
stock (Note 7) (284) (284)
--------- --------- ------- --------- -------- ---------- ---------
Balance as of Dec. 31, 1994 $ 198 $ 15,000 $29,807 $ 5,279 $140,283 $ (3,466) $ 187,101
========= ========= ======= ========= ======== ========== =========
The accompanying Notes to Financial Statements are an integral part of this
statement.
24
Notes to Financial Statements
Fiscal years ended December 31, 1994, January 1, 1994 and January 2, 1993.
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. Such cash
equivalents have maturities of less than 90 days.
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 replacements, 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. There was no interest capitalized in the
three years ended December 31, 1994.
Intangible Assets: Goodwill and licenses are being amortized on a straight-
line basis over 25 years. The company continually evaluates the existence of
goodwill impairment on the basis of whether the goodwill is fully recoverable
from projected, undiscounted net cash flows of the related business unit. The
gross amount of goodwill was $3,909,000 at December 31, 1994 and January 1,
1994. Accumulated amortization of goodwill was $469,000 and $313,000 at
December 31, 1994 and January 1, 1994, respectively. The gross amount of
licenses was $26,507,000 at December 31, 1994 and January 1, 1994. Accumulated
amortization of licenses was $3,181,000 and $2,120,000 at December 31, 1994 and
January 1, 1994, respectively.
Pensions: Pension expense includes charges for amounts not less than the
actuarially determined current service costs 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.
25
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 and after
deducting the preferred dividend requirements which accrued during the period.
The weighted average number of common shares outstanding were 29,685,000,
28,961,000 and 28,872,000 for fiscal 1994, 1993 and 1992, respectively. Fully
diluted net income per common share is not materially different from primary
net income per common share for fiscal 1994, 1993 and 1992.
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 method of accounting for the costs of certain life insurance and
medical benefits for eligible retirees and dependents in 1993.
Fair Value of Financial Instruments: Statement of Financial Accounting
Standards No. 107, "Disclosures about Fair Value of Financial Instruments,"
requires disclosure about the fair value of certain instruments. Cash, accounts
receivable, accounts payable, accrued liabilities and variable rate debt are
reflected in the financial statements at fair value because of the short-term
maturity of these instruments. The estimated fair value of the company's fixed
rate debt is disclosed in Note 6.
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
$3,909,000 was determined and is being amortized over 25 years on a straight-
line basis.
26
On June 30, 1992, the company completed the acquisition of Universal
Industries, Inc., a professional sports headwear licensee located in
Mattapoisett, Massachusetts, through an all-stock deal valued at $11.1 million
for nearly 1.3 million common shares. The valuation of common shares was based
on the average closing price per share on the New York Stock Exchange for the
20 days prior to the closing of the transaction. 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.
Six months ended
(In thousands of dollars) June 1992 (Unaudited)
---------------------
Net sales and other income:
Tultex $138,588
Universal 20,777
---------------------
Combined $159,365
---------------------
Net income:
Tultex $ (5,331)
Universal 859
---------------------
Combined $ (4,472)
=====================
Note 3-Inventories The components of inventories are as follows:
(In thousands Dec. 31, Jan. 1, Jan. 2,
of dollars) 1994 1994 1993
-------- -------- --------
Raw materials $ 25,704 $ 29,291 $ 23,664
Goods in process 13,453 11,956 13,641
Finished goods 87,436 112,296 88,549
Supplies 3,590 3,735 4,312
-------- -------- --------
Total inventories $130,183 $157,278 $130,166
======== ======== ========
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 for 1993, it decreased net income by $4,001,000
or 14 cents per share in 1992. The balances of retained earnings for the years
ended December 28, 1991 and January 2, 1993 have been adjusted for the effect
(net of income taxes) of applying retroactively the new method of valuing
inventories.
27
Note 4-Property, Plant and Equipment Property, plant and equipment, at cost,
consist of the following:
Dec. 31, Jan. 1,
(In thousands of dollars) 1994 1994
-------- --------
Land and improvements $ 3,760 $ 3,821
Buildings and improvements 68,262 68,204
Machinery and equipment 207,518 209,044
Construction in progress 2,444 2,863
-------- --------
281,984 283,932
Less accumulated depreciation 147,100 132,157
-------- --------
Net property, plant and equipment $134,884 $151,775
======== ========
In 1994, the company sold one of its yarn manufacturing facilities. The net
proceeds and gain from the sale amounted to $5,500,000 and $4,405,000,
respectively.
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, the weighted average interest rate on borrowings outstanding of
$79,825,000 was 4.1%. 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 a short-term line of credit with one lending bank
totaling $3,000,000. Total borrowings outstanding under this line at
December 31, 1994 were $1,000,000 with interest at 6.1%. There were no such
borrowings outstanding at January 1, 1994.
The company utilizes letters of credit for foreign sourcing of inventory.
Trade letters of credit outstanding were $2,026,000, $9,715,000 and $5,266,000
at December 31, 1994, January 1, 1994 and January 2, 1993, 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
Dec. 31, Jan. 1,
(In thousands of dollars) 1994 1994
-------- --------
Amount due under revolving
credit agreement $104,000 $121,000
8 7/8% senior notes due
June 1, 1999 95,000 95,000
Term loan due July 31, 1996 15,997 22,917
Other indebtedness 358 521
-------- --------
215,355 239,438
Less current maturities 132,353 8,524
-------- --------
Total long-term debt $ 83,002 $230,914
======== ========
28
On October 6, 1993, the company signed a two-year $225 million revolving
credit agreement with 12 banks with interest at or below prime plus 1/8%. Three
of the banks are co-agents, and one of the three is administrative agent. The
facility replaced the company's previous short-term credit lines used to
support working capital and future growth. The agreement expires in October,
1995.
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.
As of March 1, 1994, the company amended and restated its 8.94% term loan.
Under the terms of the restatement, interest is payable quarterly at the 90-day
LIBOR rate + .75%, and principal is due in seven remaining quarterly
installments of $2,285,000. The company also assumed the fixed cost to unwind
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 December 31, 1994, the company was in compliance or had
obtained waivers for any violations of the covenants. Consolidated retained
earnings, which were free of dividend restrictions, amounted to $3,952,000 at
December 31, 1994.
Interest paid by the company in 1994, 1993 and 1992 was $18,598,000,
$16,830,000 and $13,180,000, 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
--------
1995 $132,353*
1996 25,984
1997 19,006
1998 19,006
1999 19,006
* Includes maturity of $104,000,000 outstanding under revolving credit agree-
ment. (See Note 19.)
At December 31, 1994 and January 1, 1994, the carrying amount of the senior
notes exceeded the fair value by approximately $5,800,000 and $900,000,
respectively. The fair value of the company's senior notes was determined using
valuation techniques that considered cash flows discounted at current market
rates in effect as of December 31, 1994 and January 1, 1994.
Note 7-Dividends
At January 1, 1994, dividends payable represented amounts paid on January 3,
1994. During the second quarter of 1994, the company suspended the payment of
dividends on its preferred and common stock.
29
Prior to second quarter 1994, all stated dividends on the five percent
cumulative preferred stock had been declared and paid. Cumulative dividends
on such stock that have not been declared or paid as of December 31, 1994
amounted to $7,000. Prior to second quarter 1994, all stated dividends on the
Series B cumulative preferred stock had been declared and paid. Cumulative
dividends on such stock that have not been declared or paid as of December 31,
1994 amounted to $844,000.
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. At December 31,
1994, some options remain unexercised from the 1987 Stock Option Plan, which
expired November 19, 1992.
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 (RISOsS) or non-qualified 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 May 19, 1994, the stockholders 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
7, 2003, and provided that no participant may be granted options in any
calendar year for more than 50,000 shares of common stock. A summary of the
changes in the number of common shares under option for each of the three
previous years follows:
Year ended December 31, 1994 Number of Shares Per Share Option Price
---------------- ----------------------
Outstanding at beginning of year 928,233 $6.88-$9.75
Granted 397,500 $5.13-$6.00
Exercised - -
Expired 20,000 $9.13
Cancelled 80,333 $6.00-$9.75
---------------- ----------------------
Outstanding at end of year 1,225,400 $5.13-$9.75
================ ======================
Exercisable at end of year 1,025,400 $5.13-$9.75
================ ======================
Shares reserved for future grant:
Beginning of year 39,900
================
End of year 190,000
================
30
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
Cancelled 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
Cancelled 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
================
Note 9-Provision for Income Taxes
The components of the provision for federal and state income taxes are
summarized as follows:
(In thousands of dollars) Dec. 31, Jan. 1, Jan. 2,
1994 1994 1993
-------- -------- --------
Currently payable:
Federal $ 4,072 $ 1,192 $ 6,694
State 534 116 600
-------- -------- --------
4,606 1,308 7,294
-------- -------- --------
Deferred:
Federal 590 1,723 (214)
State 289 157 (20)
-------- -------- --------
879 1,880 (234)
-------- -------- --------
Total provision $ 5,485 $ 3,188 $ 7,060
======== ======== ========
31
Deferred income taxes resulted from the following temporary differences:
(In thousands of dollars) Dec. 31, Jan. 1, Jan. 2,
1994 1994 1993
-------- -------- --------
Depreciation $ 579 $ 2,095 $ 2,864
Inventory 1,388 (24) (3,110)
Pension 31 (486) (83)
Abandonment loss - 187 -
Intangible assets 299 283 -
Postretirement benefits (58) (172) -
AMT credit carry-forward (1,617) - -
Bad debt and other allowances 99 (2) 1
Other 158 (1) 94
-------- -------- --------
Total $ 879 $ 1,880 $ (234)
======== ======== ========
Significant components of the deferred tax liabilities and assets are as
follows:
Dec. 31, Jan. 1,
(In thousands of dollars) 1994 1994
-------- --------
Deferred tax liabilities:
Tax over book depreciation $ 16,569 $ 15,990
Spare parts inventory 776 797
Intangible assets 724 425
Inventory 177 -
Other 303 39
-------- --------
Gross deferred tax liabilities 18,549 17,251
-------- --------
Deferred tax assets:
Bad debt and other allowances 466 565
Inventory reserves - 1,211
Postretirement benefits 234 176
Pension obligations 931 962
Worker's compensation 225 182
AMT credit carryforward 1,617 -
Other 183 141
-------- --------
Gross deferred tax assets 3,656 3,237
-------- --------
Net deferred tax liabilities $ 14,893 $ 14,014
======== ========
32
A reconciliation of the statutory federal income tax rates with the company's
effective income tax rates for 1994, 1993 and 1992 was as follows:
Dec. 31, Jan. 1, Jan. 2,
1994 1994 1993
-------- -------- --------
Statutory
Federal rate 35% 34% 34%
State rate, net 3 2 2
Untaxed foreign income - - (1)
Other - (1) -
-------- -------- --------
Effective income tax rate 38% 35% 35%
======== ======== ========
Income tax payments were $4,659,000, $4,512,000 and $4,404,000 for fiscal 1994,
1993 and 1992, respectively.
In 1992, the company adopted the provisions of the Statement of Financial
Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes." The
company's adoption of SFAS No. 109 resulted in no material effect on 1992
earnings.
The company is currently undergoing an examination by the Internal Revenue
Service for the years ended 1991, 1992 and 1993. While the examination is not
complete, management does not expect the outcome to materially impact the
company's financial position or results of operations.
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 five 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 December 31, 1994, January 1, 1994 and January 2, 1993 was as
follows:
(In thousands of dollars) 1994 1993 1992
------- ------- -------
Fair value of plan assets, primarily
listed stocks and corporate and
government debt $34,594 $40,261 $40,006
------- ------- -------
Accumulated benefit obligation,
including vested benefits of $26,733,
$29,294 and $27,149, respectively 27,393 30,114 27,977
Additional benefits based on
estimated future salary levels 6,002 6,851 9,592
------- ------- -------
Projected benefit obligation 33,395 36,965 37,569
------- ------- -------
Plan assets in excess of projected
benefit obligation 1,199 3,296 2,437
Unrecognized net gain (1,273) (2,910) (1,253)
Unrecognized net transitional assets (1,838) (2,308) (2,777)
Unrecognized prior service cost 145 257 293
------- ------- -------
Accrued pension liability $(1,767) $(1,665) $(1,300)
======= ======= =======
33
The following rate assumptions were made for the plan:
1994 1993 1992
----- ----- -----
Discount rate of return on
projected benefit obligation 8.5% 7.75% 8.0%
Rate of return on plan assets 10.0% 10.0% 10.0%
The long-term rate of salary progression for 1994 reflected no rate increase
for the first year, followed by 3.5% for two years, 4% for six years with an
ultimate rate of increase of 5%. The long-term rate 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 effect of the change in assumed salary progression rates
from 1992 to 1993 had no material impact on pension expense for 1993 and
decreased pension expense for 1994 by $383,000. The changes in rates and
assumptions from year to year were made to reflect what management considered
to be a better approximation of the rates to be realized.
Pension expense in 1994, 1993 and 1992 included the following components:
(In thousands of dollars) 1994 1993 1992
------- ------- -------
Service cost-benefits earned
during the period $ 1,707 $ 1,861 $ 1,697
Interest on projected
benefit obligation 2,808 2,893 3,176
Actual (gain) loss on plan assets 4,587 (2,362) (2,400)
Net deferral (9,000) (1,919) (1,370)
Curtailment loss - - 104
Settlement gain - - (151)
------- ------- -------
Net periodic pension cost $ 102 $ 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 puchased 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
$536,000 in 1994, $547,000 in 1993 and $395,000 in 1992. The actuarially
determined liability which has been included in other deferrals was $3,506,000
at December 31, 1994, $3,190,000 at January 1, 1994 and $2,313,000 at January
2, 1993.
34
The following table sets forth the plan's status and amounts recognized in the
company's financial statements at December 31, 1994, January 1, 1994 and
January 2, 1993:
(In thousands of dollars) 1994 1993 1992
------- ------- -------
Fair value of plan assets $ - $ - $ -
Accumulated benefit obligation,
including vested benefits of $3,406,
$3,043 and $2,284, respectively 3,506 3,190 2,313
Additional benefits based on
estimated future salary levels 433 (5) 1,341
------- ------- -------
Projected benefit obligation 3,939 3,185 3,654
------- ------- -------
Projected benefit obligation in
excess of plan assets (3,939) (3,185) (3,654)
Unrecognized net loss 1,271 667 1,213
Unrecognized prior service cost 280 - -
Unrecognized transitional obligation 992 1,092 1,193
Adjustment required to recognize
minimum liability (2,110) (1,764) (1,065)
------- ------- -------
Unfunded accrued supplementary cost $(3,506) $(3,190) $(2,313)
======= ======= =======
Net supplementary pension cost for the three years included the following
components:
(In thousands of dollars) 1994 1993 1992
------- ------- -------
Service cost-benefits earned
during the period $ 139 $ 110 $ 95
Interest on projected benefit
obligation 255 276 200
Net amortization 142 161 100
------- ------- -------
Net periodic supplementary
pension cost $ 536 $ 547 $ 395
======= ======= =======
Substantially all employees meeting certain service requirements are eligible
to participate in the company's employee savings (401k) 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 in April 1993, but was
discontinued on January 2, 1994.
Substantially all employees are eligible to receive certain bonuses or
profit-sharing amounts, the amounts of which are determined at management's
discretion. Such expenses amounted to $1,791,000 in 1994, $2,329,000 in 1993
and $6,071,000 in 1992.
35
The company also provides certain postretirement medical and life insurance
benefits to substantially all employees who retire with a minimum of 20 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.
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
providing 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 obligation was
$5,101,000.
The amounts recognized in the company's balance sheet at December 31, 1994 and
January 1, 1994 were as follows:
(In thousands of dollars) 1994 1993
------- -------
Accumulated postretirement
benefit obligation $ 7,066 $ 5,323
Unrecognized transitional
obligation (4,590) (4,846)
Unrecognized loss (1,847) -
------- -------
Accrued liability $ 629 $ 477
======= =======
Net periodic postretirement benefit cost for 1994 and 1993 included the
following components:
(In thousands of dollars) 1994 1993
------- -------
Service cost-benefits earned
during the period $ 198 $ 171
Interest on accumulated
postretirement benefit obligation 398 402
Amortization of accumulated
postretirement benefit obligation 256 256
------- -------
Total periodic postretirement
benefit cost $ 852 $ 829
======= =======
The discount rate used in determining the accumulated postretirement benefit
obligation was 8.5% for 1994 and 8% for 1993. The assumed medical cost trend
rate was 12% in 1993, declining by 1% per year until an ultimate rate of 5% is
achieved. For 1994, the rate used was 11%, still declining by 1% per year until
reaching an ultimate goal of 5.5%. The medical cost rate assumption has a
significant effect on the amount of the obligation and net periodic cost
reported.
36
The adoption of Statement of Financial Accounting Standards (SFAS) No. 112,
"Employers' Accounting for Postemployment Benefits" in 1994 had no material
impact on the company's results of operations or financial position, as the
company does not have significant postemployment benefits.
Note 11-Quarterly Financial Information (Unaudited)
The following is a summary of the unaudited quarterly financial information
for the years ended December 31, 1994 and January 1, 1994.
(In thousands of dollars except per share data)
1994 1993
-------- --------
Net Sales and Other Income
1st quarter $ 86,294 $ 91,022
2nd quarter 101,900 100,238
3rd quarter 208,931 187,109
4th quarter 168,308 155,242
-------- --------
Total $565,433 $533,611
======== ========
Gross Profit
1st quarter $ 18,511 $ 21,957
2nd quarter 18,757 23,386
3rd quarter 44,136 38,742
4th quarter 42,049 31,985
-------- --------
Total $123,453 $116,070
======== ========
Income Before Income Taxes
1st quarter $ (7,916) $ (2,295)
2nd quarter (4,892) 681
3rd quarter 11,924 7,437
4th quarter 15,319 3,268
-------- --------
Total $ 14,435 $ 9,091
======== ========
Provision for Income Taxes
1st quarter $ (3,008) $ (852)
2nd quarter (1,859) 246
3rd quarter 4,531 2,767
4th quarter 5,821 1,027
-------- --------
Total $ 5,485 $ 3,188
======== ========
Net income
1st quarter $ (4,908) $ (1,443)
2nd quarter (3,033) 435
3rd quarter 7,393 4,670
4th quarter 9,498 2,241
-------- --------
Total $ 8,950 $ 5,903
======== ========
37
1994 1993
-------- --------
Net Income per Common Share
1st quarter $ (.18) $ (.06)
2nd quarter (.11) .01
3rd quarter .24 .15
4th quarter .31 .06
-------- --------
Total $ .26 $ .16
======== ========
Note 12-Commitments
At December 31, 1994, the company was obligated under a number of
noncancellable, renewable operating leases as follows:
Data Manufacturing
(In thousands Processing Facilities and
of dollars) Equipment Other Total
---------- -------------- -------
1995 $ 2,890 $ 6,877 $ 9,767
1996 2,759 5,154 7,913
1997 2,303 4,086 6,389
1998 1,056 2,930 3,986
1999 - 2,080 2,080
2000 and after - 14,054 14,054
---------- -------------- -------
$ 9,008 $ 35,181 $44,189
========== ============== =======
Rental expense charged to income was $13,358,000 in 1994, $15,092,000 in 1993
and $13,696,000 in 1992.
The company has entered into various licensing agreements which permit it to
market apparel with copyrighted logos and characters from the sports and
entertainment industries. Under the terms of these agreements, the company is
required to pay minimum guaranteed fees to certain licensors. The remaining
minimum obligations under these agreements at December 31, 1994 were
approximately $9,100,000 in fiscal 1995, $8,200,000 in fiscal 1996 and
$8,400,000 in fiscal 1997.
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 in the company (as defined) and a
termination of their employment. The maximum contingent liability at December
31, 1994 under these agreements was approximately $4,393,000.
Employment agreements with certain executives were executed as a result of the
Logo 7 acquisition. As of February 5, 1995, these agreements were renegotiated.
Under predefined events of termination, the company could incur a maximum
liability of $3,490,000.
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
had one customer that constituted 10.4% of net sales in 1994. There were no
such customers in 1993 or 1992. As disclosed on the balance sheet, the company
maintains an allowance for doubtful accounts to cover estimated credit losses.
38
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 on 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.
Note 16-Stock Purchase Plan
In February 1994, the company initiated the Salaried Employees' Stock Purchase
Plan. Under the plan, employees could 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.
Interest at 6% per annum will be charged until the stock is fully paid and the
shares will be held by the company until that time. Under the plan, 753,667
shares were issued at a price of $5.50. Of the $4,144,000 loans recorded for
the shares, $702,000 has been collected, leaving an outstanding balance at
December 31, 1994 of $3,442,000. Interest realized during 1994 on the loans
was $188,000. In January 1995, the directors of the company approved an
amendment to the plan that allows an employee options for early payment of the
loan.
Note 17-Advertising Costs
In fiscal 1995, the company will be required to adopt the provisions of the
Accounting Standards Executive Committee's Statement of Position on Reporting
Advertising Costs ("Statement"). The Statement effectively requires that
certain advertising costs which were previously deferred and amortized over
an anticipated benefit period be recognized currently in the statement of
income. If the company had adopted the Statement as of December 31, 1994,
selling, general and administrative expenses as reported on the statement of
income would have increased by approximately $4,900,000.
Note 18-Unionization of Facilities
In August 1994, hourly employees at the company's Martinsville, Virginia
facilities voted for representation by the Amalgamated Clothing and Textile
Workers Union. The company is currently negotiating a labor contract with the
union which would cover those employees.
Note 19-Refinancing
The company has filed a Registration Statement on Form S-1 with the Securities
and Exchange Commission to offer to the public an aggregate of $110,000,000
principal amount of Senior Notes due 2005 ("Senior Notes"). The company is
anticipating completion of the offering during the first quarter of 1995.
The company intends to use the net proceeds from the offering together with
borrowings under the senior credit facility referred to below to pay principal,
accrued interest and prepayment expenses related to the $95,000,000 aggregate
principal amount of senior notes due June 1, 1999 and the $15,997,000
aggregate principal amount term loan due July 31, 1996. In connection with
39
the repayment of the senior notes and the term loan, the company will be
required to write off unamortized debt issuance costs and will incur a
prepayment penalty. As of December 31, 1994, unamortized debt issuance costs
related to the senior notes and term loan were $2,913,000. If the repayment of
the senior notes and term loan had occurred at December 31, 1994, the
prepayment penalty would have been $1,278,000.
Concurrent with the Senior Note offering, the company expects to enter into a
senior credit facility with a number of banks. This facility will replace the
revolving credit agreement described in Note 6. The terms of the new facility
are expected to be substantially equivalent to those included in the existing
revolving credit agreement. Unamortized debt issuance costs related to the
revolving credit agreement at December 31, 1994 were $598,000.
All subsidiaries of the company ("Subsidiary Guarantors") will fully and
unconditionally guarantee the company's obligations under the Senior Notes on
a joint and several basis.
Note 20-Condensed Consolidating Financial Information
The following financial information presents condensed consolidating financial
data which includes (i) the parent company only ("Parent"), (ii) the
wholly-owned subsidiaries on a combined basis ("Wholly-owned Subsidiaries"),
(iii) the majority-owned subsidiary ("Majority-owned Subsidairy") and (iv) the
company on a consolidated basis. All subsidiaries will guarantee the Senior
Notes as discussed in Note 19.
Wholly-owned Majority-owned
(In thousands of dollars) Parent Subsidiaries Subsidiary Eliminations Consolidated
-------- ------------ -------------- ------------ -------------
As of and for the year ended
December 31, 1994
Current assets $242,754 $ 110,927 $ 1,938 $ (65,712) $ 289,907
Noncurrent assets 185,383 41,894 - (60,375) 166,902
-------- ------------ -------------- ------------ ------------
Total assets $428,137 $ 152,821 $ 1,938 $ (126,087) $ 456,809
======== ============ ============== ============ ============
Current liabilities $153,163 $ 76,728 $ 1,698 $ (64,536) $ 167,053
Noncurrent liabilities 101,098 1,611 (56) 2 102,655
-------- ------------ -------------- ------------ ------------
Total liabilities $254,261 $ 78,339 $ 1,642 $ (64,534) $ 269,708
======== ============ ============== ============ ============
Net sales $341,420 $ 240,239 $ 3,644 $ (19,870) $ 565,433
Costs and expenses 327,931 239,748 3,931 (20,612) 550,998
-------- ------------ -------------- ------------ ------------
Pretax net income (loss) $ 13,489 $ 491 $ (287) $ 742 $ 14,435
======== ============ ============== ============ =============
40
Wholly-owned Majority-owned
(In thousands of dollars) Parent Subsidiaries Subsidiary Eliminations Consolidated
-------- ------------ -------------- ------------ -------------
As of and for the year ended
January 1, 1994
Current assets $237,088 $ 111,401 $ 2,906 $ (62,704) $ 288,691
Noncurrent assets 203,828 44,578 - (62,132) 186,274
-------- ------------ -------------- ------------ ------------
Total assets $440,916 $ 155,979 $ 2,906 $ (124,836) $ 474,965
======== ============ ============== ============ ============
Current liabilities $ 15,597 $ 80,895 $ 2,442 $ (53,796) $ 45,138
Noncurrent liabilities 257,459 486 (51) (7,264) 250,630
-------- ------------ -------------- ------------ ------------
Total liabilities $273,056 $ 81,381 $ 2,391 $ (61,060) $ 295,768
======== ============ ============== ============ ============
Net sales $323,785 $ 234,278 $ 6,489 $ (30,941) $ 533,611
Costs and expenses 320,689 227,673 6,632 (30,474) 524,520
-------- ------------ -------------- ------------ ------------
Pretax net income (loss) $ 3,096 $ 6,605 $ (143) $ (467) $ 9,091
======== ============ ============== ============ ============
As of and for the year ended
January 2, 1993
Current assets $206,692 $ 82,901 $ 2,518 $ (42,784) $ 249,327
Noncurrent assets 205,689 45,624 - (64,822) 186,491
-------- ------------ -------------- ------------ ------------
Total assets $412,381 $ 128,525 $ 2,518 $ (107,606) $ 435,818
======== ============ ============== ============ ============
Current liabilities $105,406 $ 58,268 $ 1,999 $ (43,063) $ 122,610
Noncurrent liabilities 135,633 16 (48) (1,186) 134,415
-------- ------------ -------------- ------------ ------------
Total liabilities $241,039 $ 58,284 $ 1,951 $ (44,249) $ 257,025
======== ============ ============== ============ ============
Net sales $338,856 $ 192,586 $ 3,725 $ (31,221) $ 503,946
Costs and expenses 327,889 181,922 3,489 (29,605) 483,695
-------- ------------ -------------- ------------ ------------
Pretax net income (loss) $ 10,967 $ 10,664 $ 236 $ (1,616) $ 20,251
======== ============ ============== ============ ============
41
Note 21-Pro forma Financial Information (Unaudited)
Pro forma income from continuing operations and pro forma income per common
share from continuing operations have been calculated by adjusting historical
results of operations to give effect to the consummation of the refinancing
described in Note 19 as though the refinancing had been finalized at
January 2, 1994. Pro forma income from continuing operations and pro forma
income per common share from continuing operations for the fiscal year ending
December 31, 1994 would have been $7,215,000 and $0.20, respectively. For
purposes of preparing the pro forma financial information, the company used
rates of interest of 10.625% and 5.7% on the Senior Notes and the senior
credit facility, respectively. On a pro forma basis, a 1/8% increase in the
company's weighted average variable interest rate for the senior credit
facility would have resulted in pro forma income from continuing operations
and pro forma income per, com-mon share from continuing operations of
$7,077,000 and $0.20, respectively.
42
Report of Independent Accountants
To the Stockholders and Board of Directors of Tultex Corporation
In our opinion, 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
December 31, 1994 and January 1, 1994, and the results of their operations
and their cash flows for each of the three years in the period ended
December 31, 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 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 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. In addition, in 1993, the
company changed its method of valuing inventory and accounting for
postretirement medical and life insurance benefits, as discussed in Notes 3
and 10 of Notes to Financial Statements, respectively.
Price Waterhouse LLP
Winston-Salem, North Carolina
February 6, 1995
43
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 1995 Proxy
Statement and is incorporated herein by reference.
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
---- ------ ---
John M. Franck Chairman of the Board 42
Charles W. Davies, Jr. President and Chief Executive Officer 46
O. Randolph Rollins Executive Vice President, General
Counsel and Chief Financial Officer 52
Walter J. Caruba Vice President - Marketing and
Sales 47
W. Jack Gardner, Jr. Vice President - Operations 51
B. Alvin Ratliff Vice President - and Service/Quality
Coordinator 49
Don P. Shook Vice President - Administration 57
John J. Smith Vice President - Customer Service 52
Kevin W. Walsh Vice President - Finance and
Treasurer 40
James M. Baker Secretary 64
Suzanne H. Wood Controller 35
John M. Franck, Chairman of the Board of Directors, was Chairman of the Board
of Directors and Chief Executive Officer from January 1991 to January 1995,
and served as President and Chief Operating Officer from November 1988 to
January 1991. Mr. Franck is a director of Piedmont Trust Bank, Martinsville,
Virginia. He is the son of William F. Franck.
44
Charles W. Davies, Jr., Chief Executive Officer of the Company since January
1995, was President and Chief Operating Officer from January 1991 to January
1995, and Executive Vice President from December 1989 to January 1991. 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.
O. Randolph Rollins became Executive Vice President and General Counsel in
October 1994 and became Chief Financial Officer in January 1995. Prior
thereto, Mr. Rollins was a partner with the law firm of McQuire, Woods,
Battle & Boothe, Richmond, Virginia, from 1973 to 1990 and from January 1994
to October 1994. From 1990 to January 1994, Mr. Rollins served in the Cabinet
of Virginia's Governor L. Douglas Wilder, first as Deputy Secretary of Public
Safety and from 1992 through January 14, 1994 as Secretary of Public Safety of
the Commonwealth of Virginia. Mr. Rollins is the brother-in-law of John M.
Franck and son-in-law of William F. Franck.
Walter J. Caruba became Vice President - Marketing and Sales in September 1992.
He served as Vice President - Distribution between October 1990 and September
1992. He served as General Manager - Planning from November 1989 to October
1990 and was Director - Production Control from December 1985 to November
1989.
W. Jack Gardner, Jr. became Vice President - Operations in September 1994 and
served as General Manager - Fabric Manufacturing from January 1988 until that
time.
B. Alvin Ratliff became Vice President and Service/Quality Coordinator in
February 1994 after serving as Vice President - Operations from December 1984
until that time.
Don P. Shook became Vice President - Administration in January 1995 after
serving as Vice President - Human and Financial Resources since January 1994.
He previously served as Vice President - Finance and Administration from
December 1988 until January 1994. Prior thereto, he served as Vice President -
Finance from January 1987 to November 1988 and was Controller from December
1985 and January 1987.
John J. Smith became Vice President - Customer Service in September 1992.
Prior thereto, he served as Vice President - Sales and Marketing since December
1987 after serving as Director - Corporate Planning since May 1987. He was
Manager - Information Systems & Services between December 1985 and May 1987.
Kevin W. Walsh was appointed Vice President - Finance and Treasurer in December
1994. In the six years prior to joining the company, he was a vice president
and senior loan officer of Signet Bank.
James M. Baker became Secretary in January 1991. He also served as Treasurer
from January 1991 until January 1995 and as Director - External Reporting from
August 1987 to January 1991. Between December 1985 and August 1987 he was
Director - Budgets and Financial Reporting.
45
Suzanne H. Wood became Controller of the company in October 1993 after joining
the Company in June 1993. In the ten years prior to joining the company, she
was employed by Price Waterhouse LLP, most recently as Audit Senior Manager.
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.
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 1995
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 1995 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 1995 Proxy Statement and is incorporated herein by reference.
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.
(a) The following documents are filed as part of this report:
(1) Financial Statements:
The financial statements filed as part of this report are listed
on the Index to Consolidated Statements on page 23.
(2) Financial Statement Schedules: Page in Form 10-K
Report of Independent Accountants on
Financial Statement Schedules: F-1
Consolidated Financial Statement Schedule
for each of the three years in the period
ended December 31, 1994:
II-Valuation and Qualifying Accounts and
Reserves F-2
All other schedules are omitted because they are not applicable or the
required information is shown in the financial statements or notes thereto.
46
(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 of Tultex Corporation (filed as Exhibit
3.3 to the company's Amendment No. 1 to Form S-1 dated
March 17, 1995 and incorporated herein by reference)
3.4 Articles of Incorporation of AKOM Ltd. (filed
as Exhibit 3.4 to the company's Amendment No. 1 to Form S-1
dated March 17, 1995 and incorporated herein by reference)
3.5 By-laws of AKOM, Ltd. (filed as Exhibit 3.5 to
the company's Amendment No. 1 to Form S-1 dated
March 17, 1995 and incorporated herein by reference)
3.6 Articles of Incorporation of Dominion Stores, Inc. (filed
as Exhibit 3.6 to the company's Amendment No. 1 to Form S-1
dated March 17, 1995 and incorporated herein by reference)
3.7 By-laws of Dominion Stores, Inc. (filed as Exhibit 3.7 to
the company's Amendment No. 1 to Form S-1 dated
March 17, 1995 and incorporated herein by reference)
3.8 Articles of Incorporation of Tultex International, Inc.
(filed as Exhibit 3.8 to the company's mendment No. 1 to
Form S-1 dated March 17, 1995 and incorporated herein by
reference)
3.9 By-laws of Tultex International, Inc. (filed as Exhibit 3.9
to the company's Amendment No. 1 to Form S-1 dated
March 17, 1995 and incorporated herein by reference)
3.10 Articles of Incorporation of Logo 7, Inc. filed as Exhibit
3.10 to the company's Amendment No. 1 to Form S-1 dated
March 17, 1995 and incorporated herein by reference)
3.11 By-laws of Logo 7, Inc. (filed as Exhibit 3.11 to the
company's Amendment No. 1 to Form S-1 dated March 17, 1995
and incorporated herein by reference)
3.12 Articles of Incorporation of Universal Industries, Inc.
(filed as Exhibit 3.12 to the company's Amendment No. 1 to
Form S-1 dated March 17, 1995 and incorporated herein by
reference)
3.13 By-laws of Universal Industries, Inc. (filed as Exhibit 3.13
to the company's Amendment No. 1 to Form S-1 dated
March 17, 1995 and incorporated herein by reference)
3.14 Articles of Incorporation of Tultex Canada, Inc. (filed as
Exhibit 3.14 to the company's Amendment No. 1 to Form S-1
dated March 17, 1995 and incorporated herein by reference)
47
3.15 By-laws of Tultex Canada, Inc. (filed as Exhibit 3.15 to the
company's Amendment No. 1 to Form S-1 dated March 17, 1995
and incorporated herein by reference)
3.16 Articles of Incorporation of SweatJet, Inc. (filed as Exhibit
3.16 to the company's Amendment No. 1 to Form S-1 dated
March 17, 1995 and incorporated herein by reference)
3.17 By-laws of SweatJet, Inc. (filed as Exhibit 3.17 to the
company's Amendment No. 1 to Form S-1 dated March 17, 1995
and incorporated herein by reference)
4.1 Indenture among Tultex Corporation, the Guarantors and
First Union National Bank of Virginia, as Trustee, relating to
the Senior Notes (filed as Exhibit 4.1 to the company's
Amendment No. 1 to Form S-1 dated March 17, 1995 and
incorporated herein by reference)
4.2 Senior Note (included in Exhibit 4.1 as filed with the
company's Amendment No. 1 to Form S-1 dated March 17, 1995 and
incorporated herein by reference)
4.3 Subsidiary Guarantee (included in Exhibit 4.1 as filed
with the company's Amendment No. 1 to Form S-1 dated
March 17, 1995 and incorporated herein by reference)
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 Supplemental Retirement Plan (filed as an exhibit to the
company's Form 10-K for the fiscal year ended December 30, 1990
and incorporated herein by reference)
10.4 Tultex Corporation Salaried Employees' Common Stock Purchase
Plan, dated February 11, 1994 (filed as Exhibit 4.5 to the
company's Registration Statement Form S-8 dated
February 11, 1994 and incorporated herein by reference)
10.5 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)
10.6 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)
10.7 Credit Agreement for $225 million credit facility, dated
March 23, 1994 (filed herewith)
48
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
21 Subsidiaries of the company (filed herewith)
23.1 Consent of Price Waterhouse LLP (filed herewith)
(b) Reports of Form 8-K
No reports on Form 8-K were filed for the quarter ended
December 31 1994.
49
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/ Charles W. Davies, Jr.
----------------------------------------------
By: Charles W. Davies, Jr., President and CEO
Date: March 31, 1995
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.
March 31, 1995 /s/ Charles W. Davies, Jr.
----------------------------------------
Charles W. Davies, Jr., President, CEO &
Director (Principal Executive Officer)
March 31, 1995 /s/ O. Randolph Rollins
----------------------------------------------
O. Randolph Rollins, Executive Vice President,
General Counsel and Chief Financial Officer
(Principal Financial Officer)
March 31, 1995 /s/ Suzanne H. Wood
--------------------------------------
Suzanne H. Wood, Controller (Principal
Accounting Officer)
March 31, 1995 /s/ Lathan M. Ewers
-------------------------
Lathan M. Ewers, Director
March 31, 1995 /s/John M. Franck
-----------------------------------
John M. Franck, Director (Chairman)
March 31, 1995 /s/ William F. Franck
---------------------------
William F. Franck, Director
March 31, 1995 /s/ J. Burness Frith
--------------------------
J. Burness Frith, Director
March 31, 1995 /s/ Irving M. Groves, Jr.
-------------------------------
Irving M. Groves, Jr., Director
50
March 31, 1995 /s/ H. R. Hunnicutt, Jr.
----------------------------------
Harold R. Hunnicutt, Jr., Director
March 31, 1995 /s/ F. Kenneth Iverson
----------------------------
F. Kenneth Iverson, Director
March 31, 1995 /s/ Bruce M. Jacobson
---------------------------
Bruce M. Jacobson, Director
March 31, 1995 /s/ Richard M. Simmons
----------------------------
Richard M. Simmons, Director
March 31, 1995 /s/ John M. Tully
-----------------------
John M. Tully, Director
51
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 DECEMBER 31, 1994
TULTEX CORPORATION
COMMISSION FILE NUMBER 1-8016
52
Exhibit Index
10.7 Credit Agreement for $225 million credit facility
21 Subsidiaries of the Company
23.1 Consent of Price Waterhouse LLP
53
REPORT OF INDEPENDENT ACCOUNTANTS ON
FINANCIAL STATEMENT SCHEDULE
To the Board of Directors of
Tultex Corporation
Our audits of the consolidated financial statements referred to in our
report dated February 6, 1995 appearing on page 20 of the 1994 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 Schedule
listed in the accompanying index of this Form 10-K. In our opinion, this
Financial Statement Schedule presents fairly, in all material respects, the
information set forth therein when read in conjunction with the related
consolidated financial statements.
/s/ Price Waterhouse LLP
PRICE WATERHOUSE LLP
Winston-Salem, North Carolina
February 6, 1995
F-1
54
TULTEX CORPORATION SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS CONSOLIDATED
AND RESERVES
(In thousands of dollars)
Balance at Additions Balance
Reserve for doubtful beginning charged to at end
accounts of period operations Reductions of period
---------- ---------- ---------- ----------
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
For the fifty-two weeks
ended December 31, 1994
$ 2 ,374 $ 3,935 $ (4,194)(1) $ 2,115
(1) Amounts represent write-off of uncollectible receivable balances.
F-2