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 April 5, 1997
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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
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(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 540-632-2961
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(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
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Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of the latest practicable date.
30,086,180 shares of Common Stock, $1 par value, as of May 13, 1997
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PART I. FINANCIAL INFORMATION
Item 1.
Tultex Corporation
Consolidated Statement of Operations (Unaudited - $000's omitted except in
shares and per share data)
April 5, 1997 (and March 30, 1996)
Three Months Ended
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April 5, 1997 March 30,1996
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Net Sales and Other Income $ 99,630 $ 95,303
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Costs and Expenses:
Cost of Products Sold 73,881 70,019
Depreciation 5,092 5,736
Selling, General and Administrative 22,156 23,595
Interest 5,453 4,854
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Total Costs and Expenses 106,582 104,204
Income (Loss) Before Income Taxes (6,952) (8,901)
Benefit (Provision) for Income Taxes
(Note 3) 2,717 3,381
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Net Income (Loss) (5,520) (4,235)
Preferred Dividend Requirement
(Note 4) (284) (284)
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Balance Applicable to Common Stock $ (4,519) $ (5,804)
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Weighted Average Number of Common
Shares Outstanding 29,384,201 29,824,261
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Net Income (Loss) Per Common Share $ (.15) $ (.19)
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Dividends Per Common Share
(Note 4) $ .00 $ .00
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Tultex Corporation
Consolidated Balance Sheet (Unaudited - $000's omitted)
April 5, 1997 (and December 28, 1996)
Assets April 5, 1997 December 28, 1996
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Current Assets:
Cash $ 945 $ 1,654
Accounts Receivable - Net of Allowances for
Doubtful Accounts $3,104 (1997) and
$3,762 (1996) 108,417 160,107
Inventories (Note 2) 197,948 162,283
Prepaid Expenses 8,129 7,877
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Total Current Assets 315,439 331,921
Fixed Assets - Net 143,838 136,426
Intangible Assets 24,029 24,333
Other Assets 10,422 8,100
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Total Assets $ 493,728 $ 500,780
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Liabilities and Stockholders' Equity
Current Liabilities:
Notes Payable to Banks $ 7,525 $ 5,628
Current Maturities of Long-Term Debt 423 424
Accounts Payable 28,489 33,981
Federal and State Income Taxes
Payable (Note 3) (3,406) 1,684
Accrued Expenses 15,969 14,713
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Total Current Liabilities 49,000 56,430
Long-Term Debt, Less Current Maturities 228,861 223,616
Other Liabilities 16,125 17,806
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) 29,504 29,334
Capital in Excess of Par Value 4,057 3,416
Retained Earnings 151,339 155,663
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200,098 203,611
Less Notes Receivable - Stockholders 356 683
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Total Stockholders' Equity 199,742 202,928
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Total Liabilities and Stockholders' Equity $ 493,728 $ 500,780
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Tultex Corporation
Consolidated Statement of Cash Flows (Unaudited - $000's omitted)
Three Months Ended April 5, 1997 (and March 30, 1996)
Three Months Ended
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April 5, 1997 March 30, 1996
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Operations:
Net Income (Loss) $ (4,235) $ (5,520)
Items not Requiring (Providing) Cash:
Depreciation 5,092 5,736
Amortization of Intangible Assets 304 304
Deferred Income Taxes - -
Other Deferrals (1,681) (1,837)
Changes in Assets and Liabilities:
Accounts Receivable 51,690 47,181
Inventories (35,665) (31,680)
Prepaid Expenses (252) 3,966
Accounts Payable and Accrued Expenses (3,952) 9,239
Income Taxes Payable (5,090) (5,090)
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Cash Provided (Used) by Operations 6,211 22,299
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Investing Activities:
Additions to Property, Plant and Equipment (12,504) (4,999)
Additions to Other Assets (2,322) (3,920)
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Cash Provided (Used) by Investing Activities (14,826) (8,919)
Financing Activities:
Issuance of Short-Term Borrowings 1,897 -
Issuance of Long-Term Debt 5,250 -
Payments on Long-Term Debt (6) (13,059)
Cash Dividends (Note 4) (568) (284)
Proceeds From Stock Plans 1,581 60
Purchase of Common Stock (248) (23)
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Cash Provided (Used) by Financing Activities 7,906 (13,306)
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Net Increase (Decrease) in Cash (709) 74
Cash at End of Prior Year 1,654 1,981
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Cash at End of Period $ 945 $ 2,055
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TULTEX CORPORATION
Notes to Consolidated Financial Statements (Unaudited)
April 5, 1997
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)
April 5, 1997 December 28, 1996
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Raw Materials 30,181 31,253
Supplies 6,463 6,297
Goods-in-Process 25,856 21,464
Finished Goods 135,448 103,269
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Total Inventory $ 197,948 $ 162,283
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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 (1997and 1996).
The stated quarterly dividend was declared on February 4, 1997, and paid on
April 1, 1997.
Series B preferred stock is cumulative, convertible preferred stock, $7.50
Series B, $100 stated value, 150,000 shares authorized, issued and outstanding
(1997 and 1996). The stated quarterly dividend was declared on February 4,
1997, and paid on April 1, 1997.
Common stock, $1 par value, 60,000,000 shares authorized, shares issued and
outstanding were 29,503,571 at April 5, 1997, and 29,333,571 at December 28,
1996. There were no dividends declared on the company's common stock for the
three month period ended April 5, 1997.
NOTE 5 - Income (loss) per common share is computed using the weighted average
number of common shares outstanding in the first three months of 1997 and 1996
of 29,384,201 and 29,824,261, respectively.
Tultex Corporation
Management's Discussion and Analysis of Financial Condition and Results of
Operations
April 5, 1997
Results of Operations
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The following table presents the company's consolidated statement of operations
items as a percentage of net sales.
Three Months Ended
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04/05/97 03/30/96
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Net Sales and Other Income 100.0% 100.0%
Cost of Products Sold 74.2 73.4
Depreciation 5.1 6.0
Selling, General and Administrative 22.2 24.8
Interest 5.5 5.1
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Total Costs and Expenses 107.0 109.3
Income (Loss) Before Income Taxes (7.0) (9.3)
Benefit (Provision) for Income Taxes 2.7 3.5
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Net Income (Loss) (4.3)% (5.8)%
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Note: Certain items have been rounded to cause the columns to add to 100%.
This Quarterly Report on Form 10-Q contains certain forward-looking statements
reflecting the company's current expectations and there can be no assurances
that the company's actual future performance will meet such expectations.
Potential risks and uncertainties include such factors as the financial strength
of the retail industry, the level of consumer spending on apparel, and the
competitive pricing environment within the apparel industry. Investors are also
directed to consider other risks and uncertainties discussed in other documents
filed by the company with the Securities and Exchange Commission.
Net sales and other income for the three months ended April 5, 1997, increased
$4.3 million, or 4.5%, from the first quarter of 1996. Activewear sales of $57.6
million represent an increase of $3.0 million, or 5.4%, as compared to the first
quarter of 1996. Licensed apparel sales of $42.0 million in the first quarter
of 1997 represent an increase of $1.4 million, or 3.3%, as compared to the first
three months of 1996. During the first quarter of 1997, sales of higher margin
branded and premium private label products increased 10.1%, compared to the same
period of the prior year. Sales of jersey products were $31.5 million
representing a 5.0% increase over the first quarter of 1996.
Cost of products sold as a percentage of sales increased to 74.2% for the first
quarter of 1997 compared to 73.4% for the comparable first quarter of last year.
The decrease in margin as a percentage of sales reflects the shift in product
mix toward jersey products which typically carry a lower margin than the
company's fleece products.
Depreciation expense decreased $644,000, or 11.2%, during the first quarter of
1997. This decrease was the result of certain assets becoming fully depreciated
during 1996. The company invested $12.5 million in fixed assets during the first
three months of 1997.
Selling, general and administrative expenses (S, G&A) decreased $1.4 million
for the first quarter of 1997 compared to the same period of 1996. The primary
reason for this decrease was a $1.3 million reduction in advertising expense for
the first quarter of 1997 compared to the same period of 1996. As a percentage
of sales, S,G&A expenses were 22.2% compared to 24.8% for the first three months
of 1996.
Interest expense as a percentage of sales increased from 5.1% for the first
quarter of 1996 to 5.5% for the comparable period of 1997. Interest expense
increased from $4.9 million for the first quarter of 1996 to $5.5 million for
the first three months of 1997 due to higher average borrowings. The nature of
the company's business requires extensive seasonal borrowings to support its
working capital needs. For the first three months of 1997 working capital
borrowings averaged $115.2 million at an average rate of 7.0% compared to $105.7
million and 7.0%, respectively, for the comparable period of the prior year.
Benefit (Provision) for income taxes reflects an effective rate for combined
federal and state income taxes of 39% for the first three months of 1997 and
38% for the comparable period of 1996.
On April 16, 1997, the company acquired California Shirt Sales, Inc., an
apparel distributor in 11 western states and Hawaii. This acquisition
complements the company's strategy of becoming more marketing and distribution
oriented and takes advantage of distribution efficiencies for products from
non-US sources. Acquisition consideration comprised a combination of the
company's common stock and subordinated indebtedness, and assumption and
repayment of bank indebtedness.
Financial Condition, Liquidity and Capital Resources
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Net working capital at April 5, 1997, decreased $9.1 million from year-end 1996
due primarily to lower accounts receivable partially offset by higher
inventories. Net accounts receivable decreased $51.7 million from December 28,
1996, to April 5, 1997, 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 28, 1996, inventories increased
$35.7 million, or 22.0%.
The current ratio at April 5, 1997 was 6.4 compared to 5.9 at December 28, 1996.
The increase in the ratio from the beginning of the year was mainly due to lower
accounts payable.
Total long-term debt at April 5, 1997 included the senior notes totaling $110
million and $118.9 million outstanding under the revolving credit facility. At
the end of the first quarter of 1997, the company was in compliance with all
debt covenants.
On April 15, 1997 the company sold $75 million of 9 5/8% Senior Notes due 2007.
Proceeds from the sale of the Senior Notes will be used to repay existing
indebtedness and redeem $7,500,000 of the Series B, $7.50 cumulative convertible
preferred stock. The company is renegotiating the terms of its revolving credit
facility with a group of banks headed by NationsBank, N. A. The terms of the
new facility are substantially equivalent to those of the current revolving
credit facility, except that the maximum borrowing amount under the new facility
will be $187 million, compared with $225 million under the old facility.
Reduction of the borrowing limit reflects the sale of $75 million Senior Notes.
On March 20, 1996, the company's Board of Directors authorized the purchase of
up to 750,000 shares of the company's common stock. On October 29, 1996 the
company's Board of Directors authorized the purchase of an additional 250,000
shares. As of April 5, 1997, a total of 534,800 shares had been purchased and
retired. Stockholders' equity decreased $3.2 million during the first three
months of 1997 as a result of net loss for the period of $4.2 million, dividends
of $284,000 and stock repurchases of $248,000 partially offset by proceeds from
stock plans of $1.6 million. Debt as a percentage of total capitalization was
54.2% compared to 53.9% at March 30, 1996.
On April 28, 1997, the company called for mandatory redemption 75,000 shares of
the 150,000 outstanding shares of its $7.50 Series B, $100 stated value
Preferred Stock at a redemption price (including accrued but unpaid dividends)
of $103.75 per share.
For the first three months of 1997 net cash provided by operations was $6.2
million versus $22.3 million for the same period last year. The reduction in
operating cash was due to a decrease of $4.0 million in accounts payable and
accrued expenses compared to an increase of $9.2 million for the comparable
period of the prior year. Cash used for capital asset additions increased $7.5
million in 1997 compared to the first three months of 1996. Cash provided by
financing activities increased $21.5 million from the first three months of
1997 primarily as a result of higher seasonal borrowing requirements. 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 1997.
New Accounting Standard
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In February 1997, the Financial Accounting Standards Board (the "Board") adopted
Statement of Financial Accounting Standards No. 128, "Earnings per Share"
("FAS 128"), which replaces the presentation of primary and fully diluted
earnings per share ("EPS") with basic and diluted EPS, respectively. FAS 128
simplifies the standards for computing earnings per share and makes them
comparable to international EPS standards. It also requires dual presentation
of basic and diluted EPS on the face of the income statement for all entities
with complex capital structures and requires a reconciliation of the numerator
and denominator of the basic EPS computation to the numerator and denominator
of the diluted EPS computation.
The company must adopt this Statement in the fourth quarter of 1997. Pro forma
basic and diluted EPS were both $(.15) for the quarter ended April 5, 1997 and
$(.19) for the quarter ended March 30, 1996.
TULTEX CORPORATION
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders On April 29, 1997
at the company's Annual Meeting of Stockholders held in Martinsville, VA there
were two matters submitted to a vote of security holders.
1. A Board of Directors, consisting of eight persons, was elected for the
ensuing year.
2. The Board of Directors appointment of Price Waterhouse LLP, independent
accountants, as auditors for fiscal 1997 was ratified.
The actual vote count for these matters is summarized below.
Board of Directors:
Authority Broker
Director For Withheld Abstain Non-Votes
------------------------- ---------- --------- -------- ---------
Charles W. Davies, Jr. 24,284,976 0 375,162 0
Lathan M. Ewers, Jr. 24,363,906 0 296,232 0
John M. Franck 24,354,766 0 305,372 0
Seth P. Bernstein 24,364,265 0 295,873 0
H. Richard Hunnicutt, Jr. 24,320,801 0 339,337 0
F. Kenneth Iverson 24,364,356 0 295,782 0
Bruce M. Jacobson 24,363,906 0 296,232 0
Richard M. Simmons 24,344,106 0 315,582 0
Auditors:
Authority Broker
Independent Accountant For Withheld Abstain Non-Votes
---------------------- ---------- --------- -------- ---------
Price Waterhouse LLP 24,481,094 9,140 169,904 0
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
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None
(b) Reports on Form 8-K
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None
Items 1, 2, 3 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
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(Registrant)
Date May 20, 1997 /s/ C. W. Davies, Jr.
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C. W. Davies, Jr., President and Chief
Executive Officer
Date May 20, 1997 /s/ S. H. Wood
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Suzanne H. Wood,
Vice President and Chief Financial Officer