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 March 30, 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
incorporation or organization) Identification 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.
29,741,871 shares of Common Stock, $1 par value, as of May 1,
1996
PART I. FINANCIAL INFORMATION
Item 1.
Tultex Corporation
Consolidated Statement of Operations (Unaudited - $000's omitted
except in shares and per share data) March 30, 1996 (and April 1,
1995)
Three Months Ended
March 30, 1996 April 1, 1995
Net Sales and Other Income $ 95,303 $ 84,138
Costs and Expenses:
Cost of Products Sold 70,019 58,360
Depreciation 5,736 5,872
Selling, General and Administrative
(Note 7) 23,595 28,214
Interest 4,854 4,574
Total Costs and Expenses 104,204 97,020
Income (Loss) Before Income Taxes and
Extraordinary Loss on Early
Extinguishment of Debt (8,901) (12,882)
Provision for Income Taxes (Note 3) (3,381) (4,895)
Income (Loss) Before Extraordinary
Loss on Early Extinguishment of
Debt (5,520) (7,987)
Extraordinary Loss on Early
Extinguishment of Debt (Net of
Income Taxes of $2,296) (Note 8) - (3,746)
Net Income (Loss) (5,520) (11,733)
Preferred Dividend Requirement
(Note 4) (284) (284)
Balance Applicable to Common Stock $ (5,804) $ (12,017)
Weighted Average Number of Common
Shares Outstanding 29,824,261 29,806,793
Net Income (Loss) Per Common Share:
Income (Loss) Before Extraordinary
Loss on Early Extinguishment of
Debt (Notes 4 and 5) $ (.19) $ (.27)
Extraordinary Loss on Early
Extinguishment of Debt (Note 8) - (.13)
Net Income (Loss) $ (.19) $ (.40)
Dividends Per Common Share (Note 4)$ .00 $ .00
Tultex Corporation
Consolidated Balance Sheet (Unaudited - $000's omitted)
March 30, 1996 (and December 30, 1995)
Assets March 30, 1996 December 30, 1995
Current Assets:
Cash $ 2,055 $ 1,981
Accounts Receivable - Net of
Allowances for Doubtful
Accounts $2,860 (1996)
and $4,227 (1995) 95,551 142,732
Inventories (Note 2) 189,626 157,946
Prepaid Expenses 8,532 12,498
Total Current Assets 295,764 315,157
Fixed Assets - Net Book Value 128,265 129,002
Intangible Assets 25,246 25,550
Other Assets 10,010 6,090
Total Assets $ 459,285 $ 475,799
Liabilities and Stockholders' Equity
Current Liabilities:
Current Maturities of
Long-Term Debt (Note 6) $ 92 $ 145
Accounts Payable 32,622 27,017
Federal and State Income
Taxes Payable (Note 3) (3,809) 1,281
Accrued Expenses 15,504 11,870
Total Current Liabilities 44,409 40,313
Long-Term Debt, Less Current
Maturities (Notes 6 and 8) 214,534 227,540
Other Liabilities 17,052 18,889
Total Liabilities 275,995 286,742
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) 29,819 29,824
Capital in Excess of Par Value 5,329 5,347
Retained Earnings 134,213 140,099
184,559 190,468
Less Notes Receivable -
Stockholders 1,269 1,411
Total Stockholders' Equity 183,290 189,057
Total Liabilities and Stockholders'
Equity $ 459,285 $ 475,799
Tultex Corporation
Consolidated Statement of Cash Flows (Unaudited - $000's omitted)
Three Months Ended March 30, 1996 (and April 1, 1995)
Three Months Ended
March 30, 1996 April 1, 1995
Operations:
Net Income (Loss) (Notes 7
and 8) $ (5,520) $ (11,733)
Items not Requiring (Providing)
Cash:
Depreciation 5,736 5,872
Amortization of Intangible Assets 304 303
Deferred Income Taxes - -
Unamortized Deferred Debt Issuance
Costs - 3,109
Other Deferral (1,837) 830
Changes in Assets and Liabilities:
Accounts Receivabl 47,181 53,860
Inventories (31,680) (43,854)
Prepaid Expenses (Notes 7 and 8) 3,966 6,527
Accounts Payable and Accrued Expenses 9,239 7,440
Income Taxes Payable (5,090) (9,392)
Cash Provided (Used) by Operations 22,299 12,962
Investing Activities:
Additions to Property, Plant and
Equipment (4,999) (7,083)
Additions to Other Assets (3,920) (601)
Cash Provided (Used) by Investing
Activities (8,919) (7,684)
Financing Activities
Issuance of Short-Term Borrowings - 300
Issuance of Long-Term Debt - 110,051
Payments on Long-Term Debt (13,059) (115,049)
Cost of Debt Issuance - (4,038)
Cash Dividends Paid (Note 4) (284) -
Proceeds From Stock Plans 60 140
Purchase of Common Stock (23) -
Cash Provided (Used) by Financing
Activities (13,306) (8,596)
Net Increase (Decrease) in Cash 74 (3,318)
Cash at End of Prior Year 1,981 5,776
Cash at End of Period $ 2 ,055 $ 2,458
TULTEX CORPORATION
Notes to Consolidated Financial Statements (Unaudited) March 30,
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) March 30, 1996 December 30, 1995
Raw Materials $ 28,406 $ 20,803
Supplies 5,305 6,208
Work-in-process 23,001 17,645
Finished Goods 132,914 113,290
Total Inventory $ 189,626 $ 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 January 23, 1996 and paid on April 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 January 23, 1996 and paid on
April 1, 1996.
Common stock, $1 par value, 60,000,000 shares authorized, shares
issued and outstanding were 29,819,371 at March 30, 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 March 30, 1996.
NOTE 5 - Income (loss) per common share is computed using the
weighted average number of common shares outstanding in the first
three months of 1996 and 1995 of 29,824,261 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 March 30, 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 as reported on the Statement of
Operations for the period ended April 1, 1995 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 a number of 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
March 30, 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
03/30/96 04/01/95
Net Sales and Other Income 100.0 % 100.0 %
Cost of Products Sold 73.4 69.4
Depreciation 6.0 7.0
Selling, General and Administrative 24.8 33.5
Interest 5.1 5.4
Total Costs and Expenses 109.3 115.3
Income (Loss) Before Income Taxes
and Extraordinary Loss on Early
Extinguishment of Debt (9.3) (15.3)
Provision for Income Taxes (3.5) (5.8)
Income (Loss) Before Extraordinary
Loss on Early Extinguishment of Debt (5.8) (9.5)
Extraordinary Loss on Early
Extinguishment of Debt (Net of Income
Taxes of $2,296) - (4.4)
Net Income (Loss) (5.8)% (13.9)%
Note: Certain items have been rounded to cause the columns to
add to 100%.
Net sales and other income for the three months ended March 30,
1996 increased $11 million, or 13% from the first quarter of
1995. This increase was due to higher sales for each of the
company's primary businesses. Sales for the combined licensed
sports apparel and headwear business increased 22% as a
result of the continued strength of the Logo Athletic brand,
which experienced a 55% sales increase over the first quarter of
1995. The activewear division's sales increase of 8% was
primarily due to increased sales volume. Sales of Discus
Athletic brand activewear increased 19% to $16 million. Sales of
jersey products were $30 million representing a 16% increase over
the first quarter of 1995. The company's consolidated order
backlog at April 20, 1996 was $392 million versus $356 million at
April 22, 1995, an increase of 10%.
Cost of products sold as a percentage of sales increased to 73%
for the first quarter of 1996 compared to 69% for the comparable
first quarter of last year. Higher raw material costs due to
increased raw cotton and polyester prices was the primary reason
for the cost increase. The company has fixed the price on
approximately 60% of its planned raw cotton purchases for 1996.
Depreciation expense for the first quarter decreased $136
thousand compared to the first quarter of 1995 due to relatively
low capital expenditures during the preceding twelve months.
As a percentage of sales, selling, general and administrative
expenses (S, G&A) were 25% for the first three months of 1996
compared to 34% for the comparable period of 1995. During the
first quarter of 1995 the company expense $5 million in deferred
advertising costs 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 28% for the
first quarter of 1995. The remainder of the decrease in S, G&A
as a percentage of sales was primarily due to increased sales
levels.
The company's loss from operations (loss before interest and
income taxes) was reduced $4 million during the first quarter of
1996 to $(4) million compared to $(8) million for the first
quarter of 1995. This decrease was due to the improved
performance of the company's licensed apparel business and the
inclusion of the deferred advertising charges in the first
quarter 1995 results.
Interest expense increased 6% when compared to the first quarter
of 1995 due to higher average rates for the company's long-term
borrowings. The company completed a refinancing of it debt in
March of 1995 which resulted in higher interest expense, but
which management also believes has increased covenant flexibility
thereby allowing the company to continue its long-term investment
in brand promotion of higher margin products. The nature of the
company's business requires extensive seasonal borrowings to
support its working capital needs. For the first three months
of 1996 working capital borrowings averaged $106 million at
average rates of 7.0% compared to $98 million and 8.1%,
respectively, for the comparable period of the prior year.
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 taxes
was 38% for the first quarter of 1996 and 1995.
The company's annual financial performance is dependent on its
seasonally strong second half when historically approximately 65%
of its annual sales occur. The company is guardedly optimistic
about business prospects for the second half of 1996.
Management believes the company is positioned to benefit from
anticipated lower raw material costs, improved demand
particularly in licensed apparel and continued growth of its
premium brands, Logo Athletic and Discus Athletic.
Financial Condition, Liquidity and Capital Resources
Net working capital at March 30, 1996 decreased $23 million from
year-end 1995 due to lower accounts receivable partially offset
by higher inventories.
Net accounts receivable decreased $47 million from December 30,
1995 to March 30, 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 December 30,
1995, inventories increased $32 million or 20%. The current
ratio at March 30, 1996 was 6.7 compared to 7.8 at December 30,
1995. The decrease in the ratio from the beginning of the year
resulted primarily from lower accounts receivable.
Total long-term debt at March 30, 1996 included the senior notes
totaling $110 million and $105 million outstanding under the
revolving credit facility. At the end of the first quarter of
1996 the company was in compliance with all debt covenants.
Stockholders' equity decreased $6 million during the first three
months of 1996 as a result of the seasonal net loss for the
period of $6 million. In March 1996 the company's Board of
Directors authorized the purchase of up to 750,000 shares of the
company's common stock. Five thousand shares were repurchased
prior to the end of the first quarter. Debt as a percentage of
capitalization was 53.9% at March 30, 1996 compared to 54.6% at
December 30, 1995.
For the first three months of 1996 net cash provided by
operations was $22 million versus $13 million for the same period
last year, an increase of $9 million. The increase in cash
provided by operations was primarily due to a lower net loss and
a smaller seasonal inventory increase for the first quarter of
1996 compared to the first three months of 1995. Cash used for
capital asset additions decreased approximately $2 million in
1996 from $7 million for the first quarter of 1995 to $5 million
for the first three months of 1996. Cash used by financing
activities increased $5 million from the first three months of
1995 primarily as a result of debt repayment. 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 4. Submission of Matters to a Vote of Security Holders
On April 30, 1996 four matters were submitted to a vote of
security holders at the company's Annual Meeting of Stockholders
held in Martinsville, VA.
1. A Board of Directors, consisting of eight persons, was
elected for the ensuing year.
2. The Tultex Corporation 1996 Stock Incentive Plan was
approved.
3. The Tultex Corporation 1996 Consolidated Incentive Plan was
approved.
4. The Board of Director's appointment of Price Waterhouse LLP,
independent accountants, as auditors for fiscal 1996 was
ratified.
The actual vote count for these matters is summarized below.
Board of Directors:
Director For Withheld
Charles W. Davies, Jr. 24,119,751 676,233
Lathan M. Ewers, Jr. 24,194,945 601,039
John M. Franck 24,190,663 605,321
Irving M. Groves, Jr. 24,134,642 661,342
H. Richard Hunnicutt, Jr. 24,012,936 783,048
F. Kenneth Iverson 24,198,175 597,809
Bruce M. Jacobson 24,198,443 597,541
Richard M. Simmons, Jr. 24,142,843 653,141
Incentive Plans:
Incentive Plan For Against Abstain
Stock Incentive Plan 22,636,808 1,730,819 428,357
Consolidated Incentive
Plan 22,883,556 1,474,750 437,680
Auditors:
Independent Accountant For Against Abstain
Price Waterhouse LLP 24,267,883 99,658 428,443
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
None
(b) Reports on Form 8-K
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
(Registrant)
Date May 10, 1996 /s/ C. W. Davies, Jr.
W. Davies, Jr., President and
Chief Executive Officer
Date May 10, 1996 /s/ S. H. Wood
Vice President and Chief
Financial Officer