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 September 28, 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 (I.R.S. Employer Identification Number)
incorporation or organization)
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.
29,326,571 shares of Common Stock, $1 par value, as of October 30, 1996
- ---------- -- ----------------
PART I. FINANCIAL INFORMATION
Item 1.
Tultex Corporation
Consolidated Statement of Operations (Unaudited - $000's omitted except in
shares and per share data)
September 28, 1996 (and September 30, 1995)
Three Months Ended Nine Months Ended
--------------------------------------- ---------------------------------------
September 28, 1996 September 30, 1995 September 28, 1996 September 30, 1995
------------------ ------------------ ------------------ ------------------
Net Sales and Other Income $ 215,390 $ 207,911 $ 448,891 $ 413,035
Costs and Expenses:
Cost of Products Sold 157,706 156,340 333,170 305,173
Depreciation 4,793 5,777 16,168 17,424
Selling, General and Administrative
(Note 6) 25,949 24,724 70,524 72,348
Interest 5,931 6,181 15,799 16,171
------------------ ------------------ ------------------ ------------------
Total Costs and Expenses 194,379 193,022 435,661 411,116
------------------ ------------------ ------------------ ------------------
Income (Loss) Before Income Taxes and
Extraordinary Loss on Early
Extinguishment of Debt 21,011 14,889 13,230 1,919
Provision for Income Taxes (Note 3) 7,985 5,650 5,035 729
------------------ ------------------ ------------------ ------------------
Income (Loss) Before Extraordinary Loss
on Early Extinguishment of Debt 13,025 9,239 8,194 1,190
Extraordinary Loss on Early
Extinguishment of Debt (Net of Income
Taxes of $2,296) (Note 7) - - - (3,746)
------------------ ------------------ ------------------ ------------------
Net Income (Loss) 13,025 9,239 8,194 (2,556)
Preferred Dividend Requirement (Note 4) (284) (284) (851) (851)
Balance Applicable to Common Stock $ 12,741 $ 8,955 $ 7,343 $ (3,407)
================== ================== ================== ==================
Weighted Average Number of Common
Shares Outstanding 29,455,489 29,806,793 29,671,757 29,806,793
================== ================== ================== ==================
Net Income (Loss) Per Common Share:
Income (Loss) Before Extraordinary Loss
on Early Extinguishment of Debt
(Notes 4 and 5) $ .43 $ .30 $ .25 $ .02
Extraordinary Loss on Early
Extinguishment of Debt (Note 7) - - - (.13)
------------------ ------------------ ------------------ ------------------
Net Income (Loss) $ .43 $ .30 $ .25 $ (.11)
================== ================== ================== ==================
Dividends Per Common Share (Note 4) $ .00 $ .00 $ .00 $ .00
================== ================== ================== ==================
Tultex Corporation
Consolidated Balance Sheet (Unaudited - $000's omitted)
September 28, 1996 (and December 30, 1995)
Assets September 28, 1996 December 30, 1995
- ------ ------------------ -----------------
Current Assets:
Cash $ 4,080 $ 1,981
Accounts Receivable - Net of
Allowances for Doubtful Accounts
$4,553 (1996) and $4,227 (1995) 184,404 142,732
Inventories (Note 2) 182,532 157,946
Prepaid Expenses 8,634 12,498
----------------- -------------------
Total Current Assets 379,650 315,157
Fixed Assets - Net Book Value 134,211 129,002
Intangible Assets 24,638 25,550
Other Assets 9,890 6,090
------------------ -----------------
Total Assets $ 548,389 $ 475,799
================== =================
Liabilities and Stockholders' Equity
- ------------------------------------
Current Liabilities:
Notes Payable to Banks $ - $ -
Current Maturities of Long-Term Debt
(Note 6) 23 145
Accounts Payable 40,437 27,017
Federal and State Income Taxes Payable
(Note 3) 4,179 1,281
Accrued Expenses 22,626 11,870
------------------ -----------------
Total Current Liabilities 67,265 40,313
Long-Term Debt, Less Current Maturities
(Note 7) 269,022 227,540
Other Liabilities 17,414 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) 29,395 29,824
Capital in Excess of Par Value 3,701 5,347
Retained Earnings 147,360 140,099
------------------ -----------------
195,654 190,468
Less Notes Receivable - Stockholders 966 1,411
------------------ -----------------
Total Stockholders' Equity 194,688 189,057
------------------ -----------------
Total Liabilities and Stockholders'
Equity $ 548,389 $ 475,799
================= =================
Tultex Corporation
Consolidated Statement of Cash Flows (Unaudited - $000's omitted)
Nine Months Ended September 28, 1996 (and September 30, 1995)
Nine Months Ended
---------------------------------------
September 28, 1996 September 30, 1995
Operations: ------------------ ------------------
Net Income (Loss) (Note 7) $ 8,194 $ (2,556)
Items not Requiring (Providing) Cash:
Depreciation 16,168 17,424
Amortization of Intangible Assets 912 912
Deferred Income Taxes - -
Unamortized Deferred Debt Issuance Costs - 3,109
Other Deferrals (1,475) 1,630
Changes in Assets and Liabilities:
Accounts Receivable (41,672) (39,183)
Inventories (24,586) (48,034)
Prepaid Expenses (Note 7) 3,864 4,076
Accounts Payable and Accrued Expenses 24,176 19,810
Income Taxes Payable 2,898 (3,752)
------------------ ------------------
Cash Provided (Used) by Operations (11,521) (46,564)
------------------ ------------------
Investing Activities:
Additions to Property, Plant and
Equipment (21,377) (12,683)
Additions to Other Assets (3,800) (241)
------------------ ------------------
Cash Provided (Used) by Investing
Activities (25,177) (12,924)
------------------ ------------------
Financing Activities:
Issuance of Short-Term Borrowings - 1,600
Issuance of Long-Term Debt 41,500 172,052
Payments on Long-Term Debt (140) (111,164)
Cost of Debt Issuance - (4,038)
Cash Dividends Paid (Note 4) (851) (1,703)
Proceeds From Stock Plans 380 1,943
Purchase of Common Stock (2,092) -
------------------ ------------------
Cash Provided (Used) by Financing
Activities 38,797 58,690
------------------ ------------------
Net Increase (Decrease) in Cash 2,099 (798)
Cash at End of Prior Year 1,981 5,776
------------------ ------------------
Cash at End of Period $ 4,080 $ 4,978
================== ==================
TULTEX CORPORATION
Notes to Consolidated Financial Statements (Unaudited)
September 28, 1996
NOTE 1 - 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)
September 28, 1996 December 30, 1995
------------------ -----------------
Raw Materials $ 31,284 $ 20,803
Supplies 5,710 6,208
Work-in-Process 24,544 17,645
Finished Goods 120,994 113,290
------------------ -----------------
Total Inventory $ 182,532 $ 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 July 30, 1996, and paid on
October 1, 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 July 30, 1996,
and paid on October 1, 1996.
Common stock, $1 par value, 60,000,000 shares authorized, shares issued and
outstanding were 29,395,371 at September 28, 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 September 28, 1996.
NOTE 5 - Income (loss) per common share is computed using the weighted average
number of common shares outstanding in the first nine months of 1996 and 1995
of 29,671,757 and 29,806,793, respectively.
NOTE 6 - 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 nine months of 1995
as reported on the Statement of Operations by $4,970,000.
NOTE 7 - 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
September 28, 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 Nine Months Ended
------------------ ------------------
09/28/96 09/30/95 09/28/96 09/30/95
-------- -------- -------- --------
Net Sales and Other Income 100.0% 100.0% 100.0% 100.0%
Cost of Products Sold 73.2 75.2 74.3 73.9
Depreciation 2.2 2.8 3.6 4.2
Selling, General and Administrative 12.1 11.9 15.7 17.5
Interest 2.8 3.0 3.5 3.9
-------- -------- -------- --------
Total Costs and Expenses 90.3 92.9 97.1 99.5
Income (Loss) Before Income Taxes
and Extraordinary Loss on Early
Extinguishment of Debt 9.7 7.1 2.9 .5
Provision for Income Taxes 3.7 2.7 1.1 .2
-------- -------- -------- --------
Income (Loss) Before Extraordinary
Loss on Early Extinguishment of Debt 6.0 4.4 1.8 .3
Extraordinary Loss on Early
Extinguishment of Debt (Net of Income
Taxes of $2,296) - - - (.9)
-------- -------- -------- --------
Net Income (Loss) 6.0% 4.4% 1.8% (.6)%
======== ======== ======== ========
Note: Certain items have been rounded to cause the columns to add to 100%.
Net sales and other income for the three months ended September 28, 1996,
increased $7 million, or 4% from the third quarter of 1995. Licensed sports
apparel and headwear sales increased 14% due to continued strength of the Logo
Athletic(registered trademark) brand, which experienced a 17% sales increase
over the third quarter of 1995. Activewear sales decreased 2% primarily due
to lower fleece sales as compared to the prior year. Sales of jersey products
were $26 million representing a 20% increase over the third quarter of 1995.
The company's consolidated backlog at September 28, 1996 was $183 million
versus $196 million at September 30, 1995, a decrease of 7%.
For the nine months to date net sales and other income increased $36 million,
or 9%, primarily due to the success of the company's branded products. Discus
Athletic sales increased $5 million, or 9%, while Logo Athletic sales increased
$16 million, or 25%, for the first nine months of 1996 compared to the same
period of the prior year.
Cost of products sold as a percentage of sales decreased to 73% for the third
quarter of 1996 compared to 75% for the comparable third quarter of last year.
Lower raw material costs due to reduced raw cotton and polyester prices were
the primary reason for the decrease. For the comparative nine-month periods
cost as a percentage of sales was 74% in both 1995 and 1996.
Depreciation expense decreased $984,000, or 17%, during the third quarter of
1996, and for the nine months depreciation decreased $1 million, or 7%. These
decreases were due to assets being fully depreciated. The company expects
depreciation expense to increase during the fourth quarter due to the recent
purchase of a dye and finishing plant in Asheville, NC.
As a percentage of sales, selling, general and administrative expenses (S,G&A)
were 12% for the third quarter of both 1996 and 1995. During the nine-month
period ending September 28, 1996, S, G&A expenses as a percentage of sales
decreased to 16% of sales from 18% for the comparable period of the prior year.
The primary reason for this decrease was a one-time charge of 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 16% for the first nine
months of 1995.
Operating income increased during the third quarter to $27 million compared to
$21 million for the comparable period of the prior year. This increase was
primarily due to the improved performance of the company's licensed apparel
business.
Interest expense decreased 4% when compared to the third quarter of 1995, and
2% for the nine months ended September 28, 1996, compared to the first nine
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 nine months of 1996 working capital
borrowings averaged $134 million at an average rate of 7.0% compared to $133
million and 7.6%, respectively, for the comparable period of the prior year.
The effective rate for combined federal and state income taxes was 38% for the
first nine months of 1996 and 1995.
Management is cautiously optimistic about the prospects for an improved fourth
quarter in 1996. This improvement is highly dependent on the strength of the
retail industry and consumer spending for apparel during the fall holiday
season. Historically approximately 65% of the company's annual sales occur
during the seasonally strong second half.
Financial Condition, Liquidity and Capital Resources
- ----------------------------------------------------
Net working capital at September 28, 1996, increased $38 million from year-end
1995 due primarily to higher accounts receivable and inventories partially
offset by higher accounts payable and accrued expenses. Net accounts
receivable increased $42 million from December 30, 1995, to September 28, 1996,
due to the seasonality of the company's products. 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 December 30, 1995, inventories increased
approximately $25 million, or 16%. The current ratio at September 28, 1996,
was 5.6 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 September 28, 1996, included the senior notes totaling
$110 million and $159 million outstanding under the revolving credit facility.
At the end of the third 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. On November 7, 1996 the
company's Board of Directors authorized the purchase of an additional 250,000
shares. As of Ocdtober 31, 1996, a total of 497,800 shares had been purchased
and retired. Stockholders' equity increased $6 million during the first nine
months of 1996 as a result of net income for the period of $8 million partially
offset by repurchases of common stock totaling $2 million. Debt as a percentage
of total capitalization was 58% compared to 60% at September 30, 1995.
For the first nine months of 1996 net cash used by operations was $12 million
versus $47 million for the same period last year, an improvement of $35
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 increased approximately $9 million in 1996
compared to the first nine months of 1995. Cash provided by financing
activities decreased $20 million from the first nine 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 November 11, 1996 /s/ C. W. Davies, Jr.
--------------------------------------
C. W. Davies, Jr., President and Chief
Executive Officer
Date November 11, 1996 /s/ S. H. Wood
------------------------------------------
Suzanne H. Wood,
Vice President and Chief Financial OfficeR