UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 29, 1996
-------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
---------------- ---------------------
Commission file number 1-8016
TULTEX CORPORATION
---------------------
(Exact name of registrant as specified in its charter)
Virginia 54-0367896
- --------------------------------------------- -------------------------------
(State or other jurisdiction of incorporation (I.R.S. Employer Identification
or organization) Number)
101 Commonwealth Boulevard, P. O. Box 5191, Martinsville, Virginia 24115
- ------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 540-632-2961
------------
- ------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
---------- ----------
Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of the latest practicable date.
29,433,971 shares of Common Stock, $1 par value, as of July 26, 1996
- ---------- -- -------------
PART I. FINANCIAL INFORMATION
Item 1.
Tultex Corporation
Consolidated Statement of Operations (Unaudited - $000's omitted except in
shares and per share data)
June 29, 1996 (and July 1, 1995)
Three Months Ended Six Months Ended
------------------ ----------------------------
June 29, 1996 July 1, 1995 June 29, 1996 July 1, 1995
------------- ------------ ------------- ------------
Net Sales and Other Income $ 138,198 $ 120,986 $ 233,501 $ 205,124
------------- ------------ ------------- ------------
Costs and Expenses:
Cost of Products Sold 105,445 90,473 175,464 148,833
Depreciation 5,639 5,775 11,375 11,647
Selling, General and Administrative
(Note 7) 20,980 19,410 44,575 47,624
Interest 5,014 5,416 9,868 9,990
------------- ------------ ------------- ------------
Total Costs and Expenses 137,078 121,074 241,282 218,094
------------- ------------ ------------- ------------
Income (Loss) Before Income Taxes and
Extraordinary Loss on Early
Extinguishment of Debt 1,120 (88) (7,781) (12,970)
Provision for Income Taxes (Note 3) 431 (26) (2,950) (4,921)
Income (Loss) Before Extraordinary Loss
on Early Extinguishment of Debt 689 (62) (4,831) (8,049)
Extraordinary Loss on Early
Extinguishment of Debt (Net of Income
Taxes of $2,296) (Note 8) - - - (3,746)
------------- ------------ ------------- ------------
Net Income (Loss) 689 (62) (4,831) (11,795)
Preferred Dividend Requirement (Note 4) (284) (284) (567) (567)
------------- ------------ ------------- ------------
Balance Applicable to Common Stock $ 405 $ (346) $ (5,398) $ (12,362)
============= ============ ============= ============
Weighted Average Number of Common
Shares Outstanding 29,735,522 29,806,793 29,799,891 29,806,793
============= ============ ============= =============
Net Income (Loss) Per Common Share:
Income (Loss) Before Extraordinary Loss
on Early Extinguishment of Debt
(Notes 4 and 5) $ .01 $ (.01) $ (.18) $ (.28)
Extraordinary Loss on Early
Extinguishment of Debt (Note 8) - - - (.13)
------------- ------------ ------------- -------------
Net Income (Loss) $ .01 $ (.01) $ (.18) $ (.41)
============= ============ ============= =============
Dividends Per Common Share (Note 4) $ .00 $ .00 $ .00 $ .00
============= ============ ============= =============
Tultex Corporation
Consolidated Balance Sheet (Unaudited - $000's omitted)
June 29, 1996 (and December 30, 1995)
Assets June 29, 1996 December 30, 1995
------------- -----------------
Current Assets:
Cash $ 6,711 $ 1,981
Accounts Receivable - Net of Allowances
for Doubtful Accounts $3,586 (1996)
and $4,227 (1995) 120,819 142,732
Inventories (Note 2) 207,528 157,946
Prepaid Expenses 9,974 12,498
------------- -----------------
Total Current Assets 345,032 315,157
Fixed Assets - Net Book Value 126,223 129,002
Intangible Assets 24,942 25,550
Other Assets 9,845 6,090
------------- -----------------
Total Assets $ 506,042 $ 475,799
============= =================
Liabilities and Stockholders' Equity
Current Liabilities:
Notes Payable to Banks $ 5,000 $ -
Current Maturities of Long-Term Debt
(Note 6) 49 145
Accounts Payable 33,759 27,017
Federal and State Income Taxes Payable
(Note 3) (3,550) 1,281
Accrued Expenses 16,348 11,870
------------- -----------------
Total Current Liabilities 51,606 40,313
Long-Term Debt, Less Current Maturities
(Notes 6 and 8) 254,028 227,540
Other Liabilities 17,306 18,889
Stockholders' Equity:
Five Percent Cumulative Preferred Stock
(Note 4) 198 198
Series B, Cumulative Convertible Preferred
Stock (Note 4) 15,000 15,000
Common Stock (Note 4) 29,666 29,824
Capital in Excess of Par Value 4,726 5,347
Retained Earnings 134,618 140,099
------------- -----------------
184,208 190,468
Less Notes Receivable - Stockholders 1,106 1,411
------------- -----------------
Total Stockholders' Equity 183,102 189,057
------------- -----------------
Total Liabilities and Stockholders' Equity $ 506,042 $ 475,799
============= =================
Tultex Corporation
Consolidated Statement of Cash Flows (Unaudited - $000's omitted)
Six Months Ended June 29, 1996 (and July 1, 1995)
Six Months Ended
-----------------------------
June 29, 1996 July 1, 1995
Operations: ------------- ------------
Net Income (Loss) (Notes 7 and 8) $ (4,831) $ (11,795)
Items not Requiring (Providing) Cash:
Depreciation 11,375 11,647
Amortization of Intangible Assets 608 608
Deferred Income Taxes - -
Unamortized Deferred Debt Issuance Costs - 3,109
Other Deferrals (1,583) 1,066
Changes in Assets and Liabilities:
Accounts Receivable 21,913 19,527
Inventories (49,582) (74,579)
Prepaid Expenses (Notes 7 and 8) 2,524 6,249
Accounts Payable and Accrued Expenses 11,220 14,791
Income Taxes Payable (4,831) (9,422)
------------- ------------
Cash Provided (Used) by Operations (13,187) (38,799)
------------- ------------
Investing Activities:
Additions to Property, Plant and Equipment (8,596) (9,875)
Additions to Other Assets (3,755) (494)
------------- ------------
Cash Provided (Used) by Investing Activities (12,351) (10,369)
------------- ------------
Financing Activities:
Issuance of Short-Term Borrowings 5,000 4,500
Issuance of Long-Term Debt 26,500 157,052
Payments on Long-Term Debt (108) (111,107)
Cost of Debt Issuance - (4,038)
Cash Dividends Paid (Note 4) (567) (1,419)
Proceeds From Stock Plans 222 1,318
Purchase of Common Stock (779) -
------------- ------------
Cash Provided (Used) by Financing Activities 30,268 46,306
------------- ------------
Net Increase (Decrease) in Cash 4,730 (2,862)
Cash at End of Prior Year 1,981 5,776
------------- ------------
Cash at End of Period $ 6,711 $ 2,914
============= ============
TULTEX CORPORATION
Notes to Consolidated Financial Statements (Unaudited)
June 29, 1996
NOTE 1 - In the opinion of the Company, the accompanying consolidated
financial statements furnished in this quarterly 10-Q Report reflect all
adjustments, consisting only of normal recurring adjustments, which are, in
the opinion of management, necessary for a fair statement of the results of
the interim periods. This balance sheet, statement of income and statement
of cash flows have been prepared from the Company's records and are subject
to audit and year-end adjustments.
NOTE 2 - A summary of inventories by component follows.
(In thousands of dollars) June 29, 1996 December 30, 1995
------------- -----------------
Raw Materials $ 34,052 $ 20,803
Supplies 6,389 6,208
Work-in-process 25,023 17,645
Finished Goods 142,064 113,290
------------- -----------------
Total Inventory $ 207,528 $ 157,946
============= ================
NOTE 3 - Income taxes are provided based upon income reported for financial
statement purposes. Deferred income taxes are provided for the temporary
differences between the financial reporting basis and the tax basis of the
company's assets and liabilities.
NOTE 4 - Five percent cumulative preferred stock is $100 par value, 22,000
shares authorized, shares issued and outstanding 1,975 shares (1996 and 1995).
The stated quarterly dividend was declared on May 2, 1996 and paid on July 3,
1996.
Series B preferred stock is cumulative, convertible preferred stock, $7.50
Series B, $100 stated value, 150,000 shares authorized, issued and outstanding
(1996 and 1995). The stated quarterly dividend was declared on May 2, 1996
and paid on July 3, 1996.
Common stock, $1 par value, 60,000,000 shares authorized, shares issued and
outstanding were 29,666,471 at June 29, 1996 and 29,824,371 at December 30,
1995. There were no dividends declared on the company's common stock for the
three month period ended June 29, 1996.
NOTE 5 - Income (loss) per common share is computed using the weighted average
number of common shares outstanding in the first six months of 1996 and 1995
of 29,779,891 and 29,806,793, respectively.
NOTE 6 - The company's senior notes and revolving credit facility contain
provisions regarding the company's financial performance and condition. At
June 29, 1996, the company was in compliance with the covenants.
NOTE 7 - On January 1, 1995, the company adopted the provisions of the
Accounting Standards Executive Committee's Statement of Position on Reporting
Advertising Costs ("Statement"). The adoption of the Statement increased
selling, general and administrative expenses for the first six months of 1995
as reported on the Statement of Operations by $4,970,000.
NOTE 8 - In March 1995, the company completed its public offering of $110
million principal amount of 10 5/8% Senior Notes due 2005 and entered into a
senior credit facility with ten banks (the "Refinancing.") In connection with
the Refinancing, the company wrote-off unamortized debt issue costs of
$3,109,000 and incurred a prepayment penalty of $2,933,000. Such amounts,
net of income taxes of $2,296,000, have been reflected in the accompanying
Consolidated Financial Statements as an extraordinary loss on early
extinguishment of debt.
Tultex Corporation
Management's Discussion and Analysis of Financial Condition and Results of
Operations
June 29, 1996
Results of Operations
- ---------------------
The following table presents the company's consolidated statement of
operations items as a percentage of net sales.
Three Months Ended Six Months Ended
------------------ -----------------
06/29/96 07/01/95 06/29/96 07/01/95
-------- -------- -------- --------
Net Sales and Other Income 100.0% 100.0% 100.0% 100.0%
-------- -------- -------- --------
Cost of Products Sold 76.3 74.8 75.1 72.5
Depreciation 4.1 4.8 4.9 5.7
Selling, General and Administrative 15.2 16.0 19.1 23.2
Interest 3.6 4.4 4.2 4.9
-------- -------- -------- --------
Total Costs and Expenses 99.2 100.0 103.3 106.3
-------- -------- -------- --------
Income (Loss) Before Income Taxes and
Extraordinary Loss on Early
Extinguishment of Debt 0.8 (0.0) (3.3) (6.3)
Provision for Income Taxes 0.3 (0.0) (1.2) (2.4)
-------- -------- -------- --------
Income (Loss) Before Extraordinary Loss
on Early Extinguishment of Debt 0.5 (0.0) (2.1) (3.9)
Extraordinary Loss on Early
Extinguishment of Debt (Net of Income
Taxes of $2,296) - - - (1.8)
-------- -------- -------- --------
Net Income (Loss) 0.5% (0.0)% (2.1)% (5.7)%
======== ======== ======== ========
Note: Certain items have been rounded to cause the columns to add to 100%.
Net sales and other income for the three months ended June 29, 1996, increased
$17 million, or 14% from the second quarter of 1995. Licensed sports apparel
and headwear sales increased 16% due to continued strength of the Logo
Athletic(registered trademark) brand, which experienced a 27% sales increase
over the second quarter of 1995. Activewear sales increased 14% primarily due
to increased sales volume. Sales of Discus Athletic(registered trademark)
activewear increased 23% compared to the same period of the prior year to $18
million. Sales of jersey products were $29 million representing a 13%
increase over the second quarter of 1995. The company's consolidated backlog
at June 29, 1996 was $351 million versus $336 million at July 1, 1995, an
increase of 4%.
For the six months to date net sales and other income increased $28 million,
or 14% primarily due to the success of the company's branded products. Discus
Athletic sales increased $6 million, or 21% while Logo Athletic sales
increased $9 million or 37% for the first six months of 1996 compared to the
same period of the prior year, respectively.
Cost of products sold as a percentage of sales increased to 76% for the second
quarter of 1996 compared to 75% for the comparable second quarter of last year.
For the comparative six-month periods cost as a percentage of sales increased
from 73% in 1995 to 75% in 1996. Higher raw material costs due to increased
raw cotton and polyester prices were the primary reason for the cost increase.
The company expects its raw material costs to decline during the second half
of the year.
Depreciation expense decreased $136,000, or 2% during the second quarter of
1996, and for the six months depreciation decreased $272,000, or 2%.
As a percentage of sales, selling, general and administrative expenses (S, G&A)
were 15% for the second quarter of 1996 compared to 16% for the comparable
period of 1995. The decrease was due to higher 1996 sales and management's
continuing emphasis on cost reduction. During the six-month period ending
June 29, 1996, S, G&A expenses as a percentage of sales decreased to 19% of
sales from 23% for the comparable period of the prior year. The primary
reasons for this decrease were higher sales and a one-time charge associated
with expensing $5 million in deferred advertising costs during the first
quarter of 1995 as required by the Accounting Standards Executive Committee's
"Statement on Reporting Advertising Costs". This statement first became
effective for the company at the beginning of the 1995 fiscal year. Excluding
this one-time charge S, G&A expenses as a percentage of sales were 21% for
the first six months of 1995.
Operating income increased during the second quarter to $6 million compared to
$5 million for the comparable period of the prior year. This increase was due
to the improved performance of the company's licensed apparel business.
Interest expense decreased 7% when compared to the second quarter of 1995, and
1% for the six months ended June 29, 1996, compared to the first six months of
1995, due to lower average rates. The nature of the company's primary
businesses requires extensive seasonal borrowings to support its working
capital needs. For the first six months of 1996 working capital borrowings
averaged $118 million at an average rate of 6.9% compared to $113 million and
7.8%, respectively, for the comparable period of the prior year.
The effective rate for combined federal and state income taxes was 38% for the
first six months of 1996 and 1995.
On July 30, 1996 the company announced the purchase of a dye and finish plant
in Asheville, NC. The purchase of this plant will allow the company to
increase its internal fleece and jersey production.
During the second half of 1996, management believes the company is
well-positioned to benefit from improving activewear and licensed apparel
financial performances driven by continued growth of its premium brands, Discus
Athletic and Logo Athletic. In addition, the company's expectation of lower
fiber prices and increased sales of its higher margin brands should result in
improved second half gross margins. The company's annual financial performance
is highly dependent on its seasonally strong second half when historically
approximately 65% of its annual sales occur.
Financial Condition, Liquidity and Capital Resources
- ----------------------------------------------------
Net working capital at June 29, 1996, increased $19 million from year-end 1995
due primarily to higher inventories partially offset by lower accounts
receivable. Net accounts receivable decreased $22 million from December 30,
1995, to June 29, 1996, due to the seasonality of activewear shipments.
Receivables normally peak in September and October and begin to decline in
December as shipment volume decreases and cash is collected.
Inventories traditionally increase during the first half of the year to
support second-half shipments. Compared to the December 30, 1995, inventories
increased approximately $50 million, or 31%. The current ratio at June 29,
1996 was 6.7 compared to 7.8 at December 30, 1995. The decrease in the
ratio from the beginning of the year was mainly due to higher accounts payable
and accrued expenses.
Total long-term debt at June 29, 1996, included the senior notes totaling $110
million and $144 million outstanding under the revolver. At the end of the
second quarter of 1996, the company was in compliance with all debt
covenants.
On March 26, 1996 the company's Board of Directors authorized the purchase of
up to 750,000 shares of the company's common stock. As of June 29, 1996 a
total of 158,000 shares had been purchased. Stockholders' equity decreased
$6 million during the first six months of 1996 as a result of the net loss for
the period of $5 million and repurchases of common stock totaling $1 million.
Debt as a percentage of total capitalization was 59% compared to 60% at
July 1, 1995. The company's long-term goal is to reduce debt as a percentage
of total capitalization to 40%.
For the first six months of 1995 net cash used by operations was $13 million
versus $39 million for the same period last year, an improvement of $26
million. The reduced need for operating cash was due to a smaller seasonal
inventory increase than for the comparable period of the prior year. Cash
used for capital asset additions decreased approximately $1 million in 1996
compared to the first six months of 1995. Cash provided by financing
activities decreased $16 million from the first six months of 1995 primarily
as a result of lower borrowing requirements for working capital. The company
expects that annual cash flows from income and non-cash items, supplemented by
the revolving credit facility, will be adequate to support requirements for
the remainder of 1996.
TULTEX CORPORATION
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
None
(b) Reports on Form 8-K
None
Items 1, 2, 3, 4 and 5 are inapplicable and are omitted.
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)
Date August 12, 1996 /s/ C. W. Davies, Jr.
--------------- --------------------------------------
C. W. Davies, Jr., President and Chief
Executive Officer
Date August 12, 1996 /s/ S. H Wood
--------------- ------------------------------------
S. H. Wood, Vice President and Chief
Financial Officer