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 OCTOBER 3, 1998
---------------
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
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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
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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
---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of the latest practicable date.
30,050,836 shares of Common Stock, $1 par value, as of November 16, 1998
- - ---------- -----------------
2
PART I. FINANCIAL INFORMATION
ITEM 1.
TULTEX CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED - $000'S OMITTED EXCEPT IN
SHARES AND PER SHARE DATA) OCTOBER 3, 1998 (AND OCTOBER 4, 1997)
THREE MONTHS ENDED NINE MONTHS ENDED
----------------------------------------------
OCTOBER October OCTOBER October
3, 1998 4, 1997 3, 1998 4, 1997
---------- ---------- ---------- ----------
Net Sales $ 136,409 $ 229,342 $ 369,075 $ 476,682
-
Cost of Products Sold 118,347 183,026 307,968 381,318
---------- ---------- ---------- ----------
Gross Profit 18,062 46,316 61,107 95,364
Selling, General and Administrative 14,929 27,448 60,818 70,088
---------- ---------- ---------- ----------
Operating Income 3,133 18,868 289 25,276
Other (Income) Expense:
Interest Expense 7,318 7,853 22,360 20,195
Interest Income and Other, Net (261) (473) (1,029) (858)
Loss on Sale of Subsidiaries - - 16,304 -
---------- ---------- ---------- ----------
Income (Loss) Before Income Taxes (3,924) 11,488 (37,346) 5,939
Benefit (Provision) for Income
Taxes 1,530 (4,479) 14,565 (2,315)
---------- ---------- ---------- ----------
NET INCOME (LOSS) (2,394) 7,009 (22,781) 3,624
Preferred Dividend Requirement
(Note 4) (55) (143) (349) (664)
---------- ---------- ---------- ----------
Balance Applicable to Common Stock $ (2,449) $ 6,866 $ (23,130) $ (2,960)
========== ========== ========== ==========
Weighted Average Common Shares
Outstanding - Basic 30,004,249 29,904,382 29,923,542 29,752,870
Weighted Average Common Shares
Outstanding - Diluted 30,004,249 32,642,776 29,923,542 29,887,686
NET INCOME (LOSS) PER COMMON SHARE
BASIC $ (.08) $ .23 $ (.77) $ .10
DILUTED $ (.08) $ .22 $ (.77) $ .10
Dividends Per Common Share (Note 4) $ .00 $ .00 $ .00 $ .00
3
TULTEX CORPORATION
CONSOLIDATED BALANCE SHEET (UNAUDITED - $000'S OMITTED)
OCTOBER 3, 1998 (AND JANUARY 3, 1998)
October 3, 1998 January 3, 1998
--------------- ---------------
Assets
- - ------
Current Assets:
Cash $ 1,523 $ 2,507
Accounts Receivable - Net of Allowances for Doubtful
Accounts $7,141 (1998) and $4,205 (1997) 100,529 123,315
Inventories (Note 2) 183,012 199,855
Prepaid Expenses 6,105 9,290
Income Taxes Refundable 19,952 2,696
------------- ------------
Total Current Assets 311,121 337,663
Property, Plant and Equipment, Net of
Depreciation 110,881 127,191
Intangible Assets 22,853 44,190
Other Assets 42,895 29,182
------------- ------------
Total Assets $ 487,750 $ 538,226
============= ============
Liabilities and Stockholders' Equity
- - -------------------------------------
Current Liabilities:
Notes Payable to Banks $ - $ 5,000
Current Maturities of Long-Term Debt - 527
Accounts Payable 24,357 26,437
Accrued Expenses 11,664 9,975
Dividends Payable 31 3
------------- ------------
Total Current Liabilities 36,052 41,942
Long-Term Debt, Less Current Maturities 270,005 285,727
Deferred Income Taxes 11,278 11,278
Other Liabilities 5,156 5,167
Stockholders' Equity:
5% Cumulative Preferred Stock (Note 4) 198 198
Series B, $7.50 Cumulative Convertible Preferred Stock (Note 4) 1,500 7,500
Series C, 4.5% Cumulative Convertible Preferred Stock (Note 4) - 333
Common Stock (Note 4) 30,051 29,875
Capital in Excess of Par Value 7,099 6,893
Retained Earnings 126,793 150,005
Unearned Stock Compensation (44) (91)
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165,597 194,713
Less Notes Receivable - Stockholders 338 601
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Total Stockholders' Equity 165,259 194,112
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Total Liabilities and Stockholders' Equity $ 487,750 $ 538,226
============= ============
4
TULTEX CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED - $000'S OMITTED)
NINE MONTHS ENDED OCTOBER 3, 1998 (AND OCTOBER 4, 1997)
NINE MONTHS ENDED
------------------------------------
October 3, 1998 October 4, 1997
----------------- ----------------
Operations:
Net Income (Loss) $ (22,781) $ 3,624
Items not Requiring (Providing) Cash:
Depreciation 14,735 15,035
Amortization of Intangible Assets 2,747 1,241
Other Deferrals 695 (475)
Other Non-Cash Items 94 46
(Gain) Loss on Sale of Assets 4,901 (89)
Changes in Assets and Liabilities, Net of Effect of Sale
of Subsidiaries
Accounts Receivable (2,701) (31,602)
Inventories (52,794) (27,429)
Prepaid Expenses 1,714 (2,818)
Accounts Payable and Accrued Expenses 10,044 (2,902)
Income Taxes Refundable (17,256) (403)
----------- -------------
Cash Provided (Used) by Operations (60,602) (45,772)
----------- -------------
Investing Activities:
Capital Expenditures (6,980) (24,992)
Changes in Other Assets (1,931) (1,957)
Business Acquisitions (2,743) (21,875)
Proceeds from Sale of Subsidiaries 98,531 -
Proceeds from Sale of Property and Equipment 100 2,158
------------- -------------
Cash Provided (Used) by Investing Activities 86,977 (46,666)
------------- -------------
Financing Activities:
Issuance (Payment) of Short-Term Borrowings (5,000) (746)
Proceeds from Long-Term Borrowings - 75,000
Issuance (Payment) of Revolving Credit
Facility Borrowings (15,600) 29,400
Payments on Long-Term Borrowings (619) (516)
Costs of Debt Issuance - (2,174)
Cash Dividends (321) (664)
Proceeds from Stock Plans 181 373
Purchase of Preferred Stock (6,000) (7,500)
Issuance (Purchase) of Common Stock - (425)
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Cash Provided (Used) by Financing Activities (27,359) 92,748
------------- -------------
Net Increase (Decrease) in Cash (984) 310
Cash at End of Prior Year 2,507 1,654
------------- -------------
Cash at End of Period $ 1,523 1,964
============= ==============
5
TULTEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
OCTOBER 3, 1998
NOTE 1 - The accompanying unaudited 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. The unaudited consolidated
financial statements should be read in conjunction with the Company's annual
report on Form 10-K for the year ended January 3, 1998. This balance sheet,
statement of operations and statement of cash flows have been prepared from the
Company's records and are subject to audit and year-end adjustments.
Certain prior year amounts have been reclassified to conform with current year
presentation.
NOTE 2 - A summary of inventories by component follows.
(In thousands of dollars)
October 3, 1998 January 3, 1998
------------------ ------------------
Raw Materials $9,616 $30,198
Supplies 6,549 10,958
Goods-in-Process 26,543 19,391
Finished Goods 140,304 139,308
================== ==================
Total Inventory $183,012 $199,855
================== ==================
NOTE 3 - The Company's $187 million revolving credit facility was amended to
reflect the proceeds from the sale of substantially all the assets of its
LogoAthletic, Inc. and LogoAthletic/Headwear, Inc. (LogoAthletic) licensed
apparel subsidiaries, and to limit monthly working capital borrowings to the
amount necessary to meet seasonal operating requirements. The facility was also
amended to modify certain of the existing loan covenants. Monthly borrowing
limits available through 1999 range from a minimum of $29.1 million in the
period of lowest seasonal activity to a maximum of $87.5 million during the peak
seasonable borrowing period. After 1999, the revolving credit facility returns
to a level of $87.5 million for all months. For the third quarter, the Company
was in compliance with its covenants or had received waivers for any violations
in the debt covenants.
NOTE 4 - 5% percent cumulative preferred stock is $100 par value, 22,000 shares
authorized, 1,975 shares were issued and outstanding as of October 3, 1998 and
January 3, 1998. The stated quarterly dividend declared on August 4, 1998 has
not been paid due to restrictions in the Company's bond indenture.
Series B, $7.50 cumulative, convertible preferred stock is $100 stated value,
150,000 shares authorized, 15,000 shares were issued and outstanding as of
October 3, 1998 and 75,000 shares were issued and outstanding as of January 3,
1998. On July 15, 1998 as part of sale of LogoAthletic, the Company repurchased
60,000 shares of the outstanding preferred stock owned by investors in TKS
Acquisition, Inc., at the stated value of $100 per share. Also as part of the
transaction, the company paid a prorata dividend to the owners of the 60,000
shares repurchased. The stated quarterly dividend on the remaining 15,000
6
shares declared on August 4, 1998 has not been paid due to restrictions in the
Company's bond indenture.
On August 4, 1998, all 33,260 outstanding shares of the Series C, 4.5%
cumulative convertible preferred stock, $10 stated value, 100,000 shares
authorized, were exchanged for 143,827 shares of the Company's common stock.
There was no Series C, 4.5% cumulative convertible preferred stock outstanding
as of October 3, 1998. There were 33,260 shares outstanding as of January 3,
1998.
Common stock, $1 par value, 60,000,000 shares authorized, shares issued and
outstanding were 30,050,836 at October 3, 1998, and 29,875,488 at January 3,
1998. There were no dividends declared on the company's common stock for the
three month period ended October 3, 1998.
NOTE 5 - Income (loss) per common share is computed using the weighted average
common shares outstanding. The following table reconciles the numerators and
denominators of basic and diluted earnings per share for the three months ended
October 4, 1997 and the nine months ended October 4, 1997. The assumed
conversion of the Company's Series B convertible preferred stock and its
convertible subordinated debt would have an anti-dilutive effect for the three
months ended October 4, 1997. Since the Company incurred losses for both the
three month and nine months ended October 3, 1998, basic and diluted earnings
per share, and weighted average shares outstanding, were the same for both
periods.
Three Months Ended Nine Months Ended
October 4, 1997 October 4, 1997
--------------- -----------------
Numerator for basic EPS -
Balance applicable to
common $ 6,866 $ 2,960
Convertible subordinated
debenture interest, net
of taxes 213 -
Convertible preferred
dividends 140 -
----------------- ----------------
Numerator for diluted EPS $ 7,219 $ 2,960
=================== ===================
Denominator for basic EPS
Weighted average number
of common shares
outstanding 29,904 29,753
Diluted effect of stock
options, computed using the
treasury stock method 101 135
Diluted effect of the
conversion of the
convertible subordinated
debentures 1,889 -
Diluted effect of the
conversion of the convertible
preferred stock 749 -
----------------- ----------------
Denominator for diluted EPS 32,643 29,888
================= ==================
Earnings per common share-basic $ .23 $ .10
Earnings per common share-diluted .22 .10
7
NOTE 6 - On July 15, 1998 the Company completed the sale of substantially all
the assets of LogoAthletic to TKS Acquisition Inc., a new company headed by
Thomas K. Shine, President and CEO of LogoAthletic. Consideration to the Company
was $98.5 million in cash and $12.5 million in subordinated notes of TKS due
five years after the closing. Additional cash payments may be received by the
Company if TKS reaches certain sales targets during the next two years. As part
of the transaction, the Company repurchased $6.0 million of its outstanding
preferred stock owned by investors in TKS.
An estimated pre-tax loss from the sale of $16.3 million (after-tax of $9.9
million or $0.33 per share) was reflected in the second quarter 1998
Consolidated Statement of Operations. Additional information about the sale can
be found in Form 8-K filed with the Securities and Exchange Commission on July
29, 1998.
NOTE 7 - The following financial information presents consolidated financial
data which includes (i) the parent company only ("Parent"), (ii) the
wholly-owned guarantor subsidiaries on a combined basis ("Wholly-owned Guarantor
Subsidiaries"), (iii) the wholly-owned non-guarantor subsidiaries on a combined
basis ("Wholly-owned Non-guarantor Subsidiaries"), (iv) the LogoAthletic
subsidiaries that were sold during the third quarter of 1998 ("Subsidiaries
Sold") and (v) the company on a consolidated basis.
Wholly-owned Wholly-owned
Guarantor Non-guarantor Subsidiaries
(In thousands of dollars) Parent Subsidiaries Subsidiaries Sold (a) Eliminations Consolidated
- - ----------------------------------------------------------------------------------------------------------------------------------
For the three months ended
October 3, 1998
Net sales $121,838 $5,850 $39,372 $ 3,358 (34,009) $136,409
Cost and expenses 128,330 5,352 36,016 4,644 (34,009) 140,333
-------------------------------------------------------------------------------------------
Pretax income (loss) $ (6,492) $ 498 $ 3,356 $ (1,286) $ - (3,924)
-------------------------------------------------------------------------------------------
For the three months ended
October 4, 1997
Net sales $125,393 $6,788 $43,725 $79,179 $(25,743) $229,342
Cost and expenses 127,284 5,507 39,482 71,305 (25,724) 217,854
-------------------------------------------------------------------------------------------
Pretax income (loss) $ (1,891) $1,281 $ 4,243 $ 7,874 $ (19) $ 11,488
-------------------------------------------------------------------------------------------
For the nine months ended
October 3, 1998
Net sales $263,562 $17,409 $120,675 $63,072 $(95,643) $369,075
Cost and expenses 307,116 15,410 110,434 69,104 (95,643) 406,421
-------------------------------------------------------------------------------------------
Pretax income (loss) $(43,554) $ 1,999 $ 10,241 $ (6,032) - $ (37,346)
-------------------------------------------------------------------------------------------
8
Wholly-owned Wholly-owned
Guarantor Non-guarantor Subsidiaries
(In thousands of dollars) Parent Subsidiaries Subsidiaries Sold (a) Eliminations Consolidated
- - ----------------------------------------------------------------------------------------------------------------------------------
For the nine months ended
October 4, 1997
Net sales $ 283,681 $18,728 $81,996 $153,218 $(60,941) $476,682
Cost and expenses 291,830 15,625 76,393 147,852 (60,957) 470,743
-------------------------------------------------------------------------------------------------
Pretax income (loss) $ (8,149) $ 3,103 $ 5,603 $ 5,366 $ 16 $ 5,939
-------------------------------------------------------------------------------------------------
As of October 3, 1998
Current assets $ 266,019 $ 8,427 $50,037 $ - (13,362) $311,121
Noncurrent assets 191,428 1,701 24,019 - (40,519) 176,629
------------------------------------------------------------------------------------------------
Total assets $ 457,447 $10,128 $74,056 $ - $ (53,881) $487,750
------------------------------------------------------------------------------------------------
Current liabilities $ 21,513 $2,806 $5,577 $ - $6,156 $ 36,052
Noncurrent liabilities 286,229 54 (933) - 1,089 286,439
------------------------------------------------------------------------------------------------
Total liabilities $ 307,742 $2,860 $4,644 $ - $7,245 $322,491
------------------------------------------------------------------------------------------------
As of January 3, 1998
Current assets $ 230,643 $168,777 $64,126 $ - $(125,983) $337,663
Noncurrent assets 257,804 33,638 22,706 - (113,585) 200,563
-------------------------------------------------------------------------------------------------
Total assets $ 488,447 $202,515 $86,832 $ - $(239,568) $538,226
-------------------------------------------------------------------------------------------------
Current liabilities $ 19,925 $117,462 $24,989 $ - $(120,434) $ 41,942
Noncurrent liabilities 299,145 2,247 (306) - 1,086 302,172
-------------------------------------------------------------------------------------------------
Total liabilities $ 319,070 $119,709 $24,683 $ - $(119,348) $344,114
-------------------------------------------------------------------------------------------------
(a)Represents LogoAthletic which was a Wholly-owned Guarantor Subsidiary prior
to the sale. The effect on operations for the three month and nine months
periods for 1997 have been reclassified to conform with 1998 presentation.
9
TULTEX CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
OCTOBER 3, 1998
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
--------------------------------------------
10/03/98 10/04/97 10/03/98 10/04/97
------- ------- ------- --------
Net Sales 100.0% 100.0% 100.0% 100.0%
Cost of Products Sold 86.8 79.8 83.4 80.0
------- ------- ------- -------
Gross Profit 13.2 20.2 16.6 20.0
Selling, General and
Administrative 10.9 12.0 16.5 14.7
------- ------- ------- -------
Operating Income 2.3 8.2 0.1 5.3
Interest Expense 5.4 3.4 6.1 4.2
Interest Income and Other, Net (0.2) (0.2) (0.3) (0.2)
Loss on Sale of Subsidiaries - - 4.4 -
------- ------- ------- -------
Income (Loss) Before Income Taxes (2.9) 5.0 (10.1) 1.3
Benefit (Provision) for Income
Taxes 1.1 (2.0) 3.9 (0.5)
------- ------- ------- -------
Net Income (Loss) (1.8)% 3.0% (6.2)% 0.8%
======= ======= ======= =======
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
CONDITION OF THE COMPANY, THE COST OF BORROWINGS, THE ABILITY OF THE COMPANY TO
REMAIN IN COMPLIANCE WITH ITS DEBT COVENANTS, THE FINANCIAL STRENGTH OF THE
RETAIL INDUSTRY, THE LEVEL OF CONSUMER SPENDING ON APPAREL, THE COMPETITIVE
PRICING ENVIRONMENT WITHIN THE APPAREL INDUSTRY AND REMEDIATION OF YEAR 2000
COMPUTER PROBLEMS. 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 loss applicable to common stock for the third quarter of 1998 was $2.4
million, or $0.08 per share, compared with net income applicable to common stock
of $6.9 million, or $0.23 per share in the third quarter of 1997. On a pro forma
basis, assuming the sale of the LogoAthletic, Inc. and LogoAthletic/Headwear,
Inc. (LogoAthletic) licensed apparel subsidiaries had occurred at the beginning
of the applicable period, net loss applicable to common stock for the third
quarter of 1998 was $1.4 million, or $0.05 per share, compared to pro forma net
income applicable to common stock of $3.8 million, or $0.13 per share in the
third quarter of 1997. The net loss applicable to common stock for the first
nine months of fiscal 1998 was $23.1 million, or $0.77 per share, compared with
a net income applicable to common stock of $3.0 million, or $0.10 per share in
the comparable 1997 period. Results for the nine months of 1998 include a
provision for an estimated pre-tax loss of $16.3 million (after-tax of $9.9
million or $0.33 per share) related to the sale of substantially all the assets
of LogoAthletic. Excluding the provision for estimated loss on the sale of the
LogoAthletic, the net loss applicable to common stock for the nine-month period
ended October 3, 1998 was $13.2 million, or $0.44 per share. On a pro forma
basis, the net loss applicable to common stock for the first nine months of
fiscal 1998, excluding the loss on the sale of LogoAthletic, was $7.2 million,
or $.24 per share, compared to pro forma net income applicable to common
10
stock of $3.8 million, or $.13 per share, in the comparable period of 1997.
Net sales for the three months ended October 3, 1998 were $136.4 million as
compared to $229.3 million in the comparable period of 1997. The decline is
primarily a result of the LogoAthletic sale on July 15, 1998. On a pro forma
basis, excluding the effects of LogoAthletic, sales were $136.9 million for the
1998 period as compared to $157.5 million in the 1997 period. The pro forma
sales decrease is the result of lower volume in fleece products as well as lower
prices in jersey products. Sales volume for jersey products increased in 1998
compared to 1997.
For the nine months to date, net sales decreased $107.6 million, or 22.6%. The
nine month period includes LogoAthletic sales through July 14, 1998. The
decrease in sales is due primarily to the sale of LogoAthletic, lower activewear
sales and lower licensed apparel sales in the first six months of 1998 compared
to the same period in 1997. The activewear sales decrease of 5.7% reflects lower
volume in fleece products as well as lower prices in jersey products. The
decrease in licensed apparel sales resulted from weak demand for NBA products.
On a pro forma basis, sales for the nine months to date were $318.1 million
compared to pro forma sales of $343.3 million in the comparable period of 1997.
Gross profit percentage of 13.2% in the three months ended October 3, 1998
declined 7.0% from 20.2% in the three months ended October 4, 1997. The decline
is primarily the result of the sale of LogoAthletic, as these businesses
operated with higher gross profit percentages than the activewear business. On a
pro forma basis, excluding the effects of LogoAthletic, the gross profit
percentage was 12.9% in the three months ended October 3, 1998 as compared to
14.3% in the comparable 1997 period. The decrease reflects competitive pricing
pressure on jersey products and the shift in product mix toward jersey products
which typically carry a lower margin than the Company's fleece products. For the
nine-month period, the gross profit percentage of 16.6% in 1998 declined 3.4%
from the 1997 percentage of 20.0%. On a pro forma basis, the gross profit
percentage of 14.3% in the nine-month period of 1998 declined 1.3% from the 1997
percentage due to competitive price conditions.
Selling, general and administrative expenses (S,G&A) decreased $12.5 million for
the third quarter of 1998 compared to the same period of 1997. As a percentage
of sales, S,G&A expenses were 10.9% compared to 12.0% for the third quarter of
1997. The primary reason for the decrease was the sale of LogoAthletic, which
incurred proportionally higher advertising and marketing costs than the
activewear business. On a pro forma basis, excluding the effect of LogoAthletic,
third quarter 1998 S,G&A expenses of $12.8 million were 9.4% of pro forma sales
as compared to $10.9 million, or 6.9% of pro forma sales in the comparable 1997
period. The increase results from higher computer equipment and software
amortization and higher advertising expenses. For the nine-month period ended
October 3, 1998, S,G&A expenses were $60.8 million, or 16.5% of sales, compared
to $70.1 million, or 14.7% of sales in 1997. On a pro forma basis, excluding the
effect of LogoAthletic, S,G&A expenses in 1998 of $39.2 million, or 12.3% of
sales, were higher than the comparable 1997 amount of $33.0 million, or 9.6% of
sales. The increase in spending is primarily the result of the inclusion of the
Cal Shirt and T-Shirt City subsidiaries, which were purchased in the second
quarter of 1997, for the entire period in 1998. In addition, higher computer
equipment and software amortization and higher advertising expenses contributed
to the increase as a percentage of sales.
Interest expense for the third quarter of 1998 was $7.3 million compared to $7.9
million in the comparable period of 1997. The decrease for the third quarter
over the comparable period of 1997 is due to lower
11
average borrowings, partially offset by higher borrowing rates. Third quarter
working capital borrowings averaged $104.7 million at an average rate of 8.5%
compared to $160.9 million and 7.2%, respectively, for the comparable period of
the prior year. The reduction in average borrowings reflect the proceeds
received from the sale of LogoAthletic. Interest expense for the nine months was
$22.4 million compared to $20.2 million in the same period in 1997. The increase
for the nine months is due to higher average borrowing rates. The higher average
borrowing rates were due to the issuance of $75 million of 9 5/8% Senior Notes
in the second quarter of 1997, which carry a higher rate than the Company's
revolving credit facility borrowings, and a higher rate on the working capital
borrowings. For the first nine months of 1998, working capital borrowings
averaged $114.6 million at an average rate of 8.2% compared to $129.7 million
and 7.2%, respectively, for the comparable period of the prior year. The nature
of the Company's business requires extensive seasonal borrowings to support its
working capital needs.
Benefit (Provision) for income taxes reflects an effective rate for combined
federal and state income taxes of 39% for both periods of 1998 as well as for
the comparable periods of 1997.
YEAR 2000
- - ----------
The Year 2000 issue is the result of computer systems and other equipment with
embedded chips using two digits, rather than four, to define the applicable
year. If the Company's computer systems are not Year 2000 compliant, they may
recognize a date using "00" as the Year 1900 rather than the Year 2000. If not
corrected, computer applications could fail or create erroneous results which
could have a material adverse impact on the Company's business, operations or
financial condition in the future.
The Company began addressing the Year 2000 issue in 1995 with the formation of a
Y2K Team. The Company is in the process of addressing Year 2000 compliance, both
internally and with third parties. The Company's objective is to confirm
compliance by July 3, 1999. Third parties that are not compliant at that time
may delay compliance. The Year 2000 Project is comprised of four phases:
1. Inventory of all hardware, software, local area networks, personal
computers, telecommunications equipment and software (data and voice),
program logic controllers (PLC) and non-information technology embedded
software and equipment.
2. Assessment of the inventory through testing for Year 2000 compliance.
3. Remediation of all affected systems. Systems will be modified, upgraded
or replaced as appropiate for compliance. Contingency plans will be
established for areas of concern.
4. Testing of internal system compliance and testing with customers and
suppliers will be performed on an ongoing basis until project
completion.
The Company has completed the inventory phase. The assessment and remediation
phases are in process. The assessment phase is scheduled for completion by
January 2, 1999. The remediation phase is scheduled for completion by April 3,
1999. The testing phase will be ongoing as hardware and software is remediated,
upgraded or replaced.
As part of the Year 2000 Project, the Company is implementing a new Enterprise
Resource Planning system (ERP), which will replace 80% of the Company's Legacy
systems with Year 2000 compliant software. All major infrastructure, computers,
PC's and telecommunications equipment has been replaced with Year 2000 compliant
hardware and software as part of the project. The Company has implemented
approximately 75% of the system to date with the remaining 25% scheduled to be
implemented by April 3,
12
1999. Additionally, the company is in the process of loading the Year 2000
compliant versions of electronic data interchange (EDI) systems for testing with
the Company's customers. This testing is scheduled to commence in the first
quarter of 1999. The remaining Legacy software has been identified, assessment
is nearing completion, and upgrades or replacements are being ordered for
non-compliant software and hardware. Updates or modification to this software
is scheduled for completion by April 3, 1999, with testing scheduled for
completion by July 3, 1999.
The Company relies on third party suppliers for raw materials, water, utilities,
transportation and other services. Interruption of supplier operations due to
Year 2000 issues could affect Company operations. The Company has initiated
efforts with all major suppliers to gauge compliance and exposure in these
areas. The Company has formally requested written confirmation of Year 2000
compliance from its major contractors and vendors. Approximately 50% have
responded to date. Specific testing will be requested where appropriate. Should
any vendor, supplier, equipment or process not be able to conform within the
prescribed timeframes, the Company will take appropriate action to ensure
continuity of its business. Contingency plans will be developed for any area not
able to conform within the prescribed timeframe. While approaches to reducing
risks of interruption due to supplier failures will vary by facility, options
include identification of alternate suppliers, stockpiling raw materials and
adjusting operating schedules. Costs associated with any contingency will be
determined as this assessment continues.
Year 2000 Project costs are linked with the ERP implementation costs. Total
costs for both the Year 2000 Project and the ERP system implementation is
expected to be approximately $20.5 million. Of this total, $19.5 million has
been incurred and capitalized as part of the ERP implementation as of October 3,
1998. The remaining $1.0 million is specifically related to Year 2000 project
costs and will be expensed as incurred over the next twelve to fifteen months.
These costs will include external testing with banks, vendors and customers, as
well as EDI software upgrades. The Company believes the remaining costs relating
to the Year 2000 issue will not have a material impact on the Company's
consolidated financial position, results of operations or cash flows.
Due to the general uncertainty inherent in the Year 2000 problem, resulting in
part from the readiness of third-party suppliers and customers, the Company is
unable to determine at this time whether the consequences of Year 2000 failures
will have a material impact on the company's results of operations, liquidity or
financial condition. The Year 2000 Project is expected to significantly reduce
the company's level of uncertainty about the Year 2000 problem and about the
Year 2000 compliance of its major suppliers and customers. The Company believes
that, with the implementation of its new ERP systems and the completion of the
Year 2000 project as scheduled, the possibility of interruptions of normal
operations is reduced.
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
- - ----------------------------------------------------
Net working capital at October 3, 1998 decreased $20.7 million from year-end
1997 due primarily to lower inventories and accounts receivable, partially
offset by higher income taxes refundable. Compared to January 3, 1998,
inventories decreased $16.8 million, or 8.4%. Net accounts receivable decreased
$22.8 million from January 3, 1998 to October 3, 1998. The decrease in
inventories and accounts receivable resulted primarily from the sale of
LogoAthletic. Income taxes refundable increased $17.3 million as a result of the
net loss incurred for the nine month period.
The current ratio at October 3, 1998 was 8.6 compared to 8.1 at January 3, 1998.
13
Total long-term debt at October 3, 1998 included senior notes totaling $185
million and $70.6 million outstanding under the revolving credit facility. The
reduction in long-term debt from January 3, 1998 reflects the applicaton of the
proceeds received from the sale of LogoAthletic against the Company's revolving
credit facility, offset by additional borrowings.
The Company's $187 million revolving credit facility was amended to reflect the
proceeds from the sale of LogoAthletic and to limit monthly working capital
borrowings to the amount necessary to meet seasonal operating requirements. The
facility was also amended to modify certain of the existing loan covenants.
Monthly borrowing limits available through 1999 range from a minimum of $29.1
million in the period of lowest seasonal activity to a maximum of $87.5 million
during the peak seasonable borrowing period. After 1999, the revolving credit
facility returns to a level of $87.5 million for all months. For the third
quarter, the Company was in compliance with its covenants or had received
waivers for any violations in the debt covenants.
Debt as a percentage of total capitalization was 62.0% as of October 3, 1998
compared to 60.0% as of January 3, 1998.
For the first nine months of 1998, net cash used by operations of $60.5 million
reflects an increase in inventories and accounts receivable. Cash provided by
investing activities was $86.9 million in 1998 compared to cash used in the
first nine months of 1997 of $46.8 million. The cash provided in 1998 reflects
the proceeds from the sale of LogoAthletic and lower capital additions as
compared to 1997. Cash used by financing activities was $27.4 million in 1998
compared to cash provided in the first nine months of 1997 of $92.7 million. The
cash used in financing activities reflects the application of the proceeds from
the sale of LogoAthletic against the Company's revolving credit facility
partially offset by cash used for the Company's working capital requirements.
The cash provided by financing activities in 1997 reflects the issuance of $75
million in senior notes. The company expects that annual cash flows from income
adjusted for non-cash items, supplemented by the revolving credit facility, will
be adequate to support requirements for the remainder of 1998.
NEW ACCOUNTING STANDARDS
- - ------------------------
In June 1997, the Financial Accounting Standards Board (the "Board") adopted
Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive
Income" ("FAS 130"), which establishes standards for the reporting and display
of comprehensive income and its components in financial statements. FAS 130
requires that all items that are required to be recognized under accounting
standards as components of comprehensive income be reported in a financial
statement that is displayed with the same prominence as other financial
statements. The Company adopted this statement in the first quarter of 1998,
however there were no items which gave rise to other comprehensive income during
either the first nine months of 1998 or the first nine months of 1997.
In June 1997, the Board issued FAS 131, "Disclosures about Segments of an
Enterprise and Related Information". This Statement will change the way the
company reports information about segments of their business in their annual
financial statements and require the company to report selected segment
information in their quarterly reports issued to shareholders. It also requires
entity-wide disclosures about the products and services an entity provides, the
material countries in which it holds assets and reports
14
revenues, and its major customers. The Statement requires the company to
disclose segment data based on how management makes decisions about allocating
resources to segments and measuring their performance. This statement is
effective for financial statements for periods beginning after December 15,
1997. Disclosure of segment information is not required in interim financial
statements in the initial year of its application.
TULTEX CORPORATION
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
- - ------------------------------------------
(a) Exhibits
--------
10.1 Amended Credit Agreement for $112 Million Revolving Credit
Facility, dated September 18, 1998
10.2 Amended Credit Agreement for $87.5 Million Revolving Credit
Facility, dated November 16, 1998
(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 17, 1998 /s/ C. W. Davies, Jr.
----------------- ------------------
C. W. Davies, Jr., President and Chief
Executive Officer
Date November 17, 1998 /s/ J. F. Kies
----------------- ---------------
Jeffrey F. Kies,
Controller and Chief Accounting
Officer
15
Exhibit 10.1
AMENDMENT NO. 2
THIS AMENDMENT NO. 2 dated as of September 18, 1998 (the "Amendment")
relating to the Credit Agreement referenced below, by and among TULTEX
CORPORATION, a Virginia corporation (the "Borrower"), the Guarantors and Banks
identified therein, and NATIONSBANK, N.A., as Administrative Agent (the
"Administrative Agent"). Terms used but not otherwise defined shall have the
meanings provided in the Credit Agreement.
W I T N E S S E T H
WHEREAS, a $187 million credit facility has been extended to Tultex
Corporation pursuant to the terms of that Credit Agreement dated as of May 15,
1997 (as amended and modified the "Credit Agreement") among Tultex Corporation,
the Guarantors and Banks identified therein, Corestates Bank, N.A. and First
Union National Bank, as co-agents and NationsBank, N.A., as Administrative
Agent;
WHEREAS, the Credit Agreement was the subject of an Amendment, Consent and
Waiver dated as of March 10, 1998 and a Consent dated as of May 8, 1998;
WHEREAS, the Borrower has requested certain modifications under of the
Credit Agreement;
WHEREAS, such modification and waiver requires the consent of the Required
Banks;
WHEREAS, the Required Banks have consented to the requested modifications
and waiver on the terms and conditions set forth herein;
NOW, THEREFORE, IN CONSIDERATION of the premises and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:
1. The Credit Agreement is amended and modified in the following respects:
1.1 The aggregate Revolving Committed Amount referenced in Section
2.01, which currently reads "(i) with regard to the Banks collectively, the
amount of Committed Revolving Loans outstanding shall not at any time exceed ONE
HUNDRED EIGHTY-SEVEN MILLION DOLLARS ($187,000,000) in the aggregate (as such
aggregate maximum amount may be reduced from time to time as hereinafter
provided, the "Revolving Committed Amount")" is reduced and amended to read as
follows:
16
(i) with regard to the Banks collectively, the amount of Committed
Revolving Loans outstanding shall not at any time exceed ONE HUNDRED
TWELVE MILLION DOLLARS ($112,000,000) in the aggregate (as such aggregate
maximum amount may be reduced from time to time as hereinafter provided,
the "Revolving Committed Amount")" is reduced and amended to read as
follows:
1.2 Certain Letters of Credit were previously issued under the
Credit Agreement for the benefit of Logo Athletic, Inc. ("Logo") and Logo
Athletic/Headwear, Inc. ("LogoAH"). Substantially all of the assets and
operations of the Logo and LogoAH were recently sold (consent to which was given
by the Required Lenders by way of the Consent dated as of May 8, 1998). So as
not to disrupt operations, the purchaser of Logo and LogoAH has requested that
the existing Letters of Credit issued under the Credit Agreement remain
outstanding for a bridge period. The Lenders hereby consent to the requested
arrangement whereby Letters of Credit previously issued in support of operations
of Logo and LogoAH may remain outstanding without replacement, and the related
Letters of Credit and Letter of Credit Obligations will not constitute usage
under, or otherwise count against, the aggregate Revolving Committed Amount;
provided that (i) all such Letters of Credit shall be replaced or shall expire
or terminate prior to December 31, 1998; and (ii) the maximum amount available
to be drawn under such Letters of Credit shall be supported by a back-up
irrevocable letter of credit in form and tenor substantially in the form
attached as Schedule I from PNC Bank, N.A. or other bank reasonably acceptable
to the Administrative Agent and the Required Lenders.
1.3 In Section 1.01, the definition of "Net Income Available for
Fixed Charges" is amended to restate clause (ii) of the "plus" provision thereof
to read as follows:
"(ii) all provisions for any Federal, state or other income taxes or
refunds made by the Borrower and its Restricted Subsidiaries during such
period,"
1.4 The financial covenants in Section 6.11 are amended and restated
to read as follows:
6.11 Financial Covenants.
-------------------
(a) Consolidated Tangible Net Worth. The Borrower will not
permit Consolidated Tangible Net Worth on each Determination Date after
the Closing Date to be less than $118,000,000 beginning the Determination
Date occurring as of the end of the second fiscal quarter of 1998 and
thereafter; provided, however, the minimum Consolidated Tangible Net Worth
required hereunder shall increase on the last day of each fiscal year to
occur after the Closing Date to an amount equal to the sum of (i) the
Consolidated Tangible Net Worth required to be maintained on the last day
of the immediately preceding fiscal year, plus (ii) an amount equal to 50%
of Consolidated Net Income for the fiscal year ending as of such date (or
if Consolidated Net Income is a deficit figure for such year, then zero),
plus (iii) 100% of the net proceeds received by the Borrower or any
Restricted Subsidiary pursuant to any Equity Transaction from and after
the Closing Date (other than and to the extent, the net proceeds from a
Equity Transaction shall be used within 90 days of receipt to redeem or
purchase preferred stock of the Borrower).
(b) Consolidated Funded Debt to Consolidated Tangible
Capitalization Ratio. On each Determination Date the Borrower will not
permit the ratio of the aggregate outstanding principal amount of
Consolidated Funded Debt to Consolidated Tangible Capitalization to exceed
.78:1.0.
17
(c) Fixed Charges Coverage Ratio. The Borrower will keep and
maintain as of each Determination Date to occur during the periods shown a
ratio of Net Income Available for Fixed Charges to Fixed Charges for a
period of four consecutive fiscal quarters ending as of the Determination
Date of not less than:
Fiscal Year 1QE 2QE 3QE 4QE
----------- --- --- --- ----
1998 .80 .85 .60 1.05
1999 1.15 1.25 1.25 1.25
and on each Determination Date thereafter at 1.25.
(d) Current Ratio. There shall be maintained as of each
Determination Date, a Current Ratio, of at least 3.0:1.0.
(e) Consolidated Leverage Ratio. On each Determination
Date, the Consolidated Leverage Ratio will be not greater than:
Fiscal Year 1QE 2QE 3QE 4QE
----------- --- --- --- ---
1998 11.50 6.10
1999 5.60 6.00 5.40 4.40
and on each Determination Date thereafter at 4.40.
1.5 An updated version of Schedule 2.01(a) is attached as a
convenience to reflect the decrease in aggregate Revolving Committed Amounts and
changes in the composition of the Lenders.
2. The effectiveness of this Amendment is subject to satisfaction of the
following conditions:
(a) receipt by the Administrative Agent of copies of this Amendment
executed by the Credit Parties and Required Lenders;
(b) receipt by the Administrative Agent of corporate resolutions and
legal opinions relating to this Amendment in form and substance
satisfactory to the Administrative Agent and Required Lenders; and
(c) receipt by the Administrative Agent of an amendment fee of
$140,000 to be shared ratably by the Lenders approving this Amendment.
3. Except as expressly modified hereby, all of the terms and provisions of
the Credit Agreement remain in full force and effect.
4. The Borrower agrees to pay all reasonable costs and expenses in
connection with the preparation, execution and delivery of this Amendment,
including the reasonable fees and expenses of the Administrative Agent's legal
counsel.
18
5. This Amendment may be executed in any number of counterparts, each of
which when so executed and delivered shall be deemed an original. It shall not
be necessary in making proof of this Amendment to produce or account for more
than one such counterpart.
6. This Amendment, as the Credit Agreement, shall be deemed to be a
contract under, and shall for all purposes be construed in accordance with, the
laws of the Commonwealth of Virginia.
19
IN WITNESS WHEREOF, each of the parties hereto has caused a counterpart of
this Amendment to be duly executed and delivered as of the date first above
written.
BORROWER: TULTEX CORPORATION,
- - --------- a Virginia Corporation
By:___________________________________
Title:
GUARANTORS:
- - ----------
DOMINION STORES, INC.,
a Virginia corporation
By:___________________________________
Title:
LOGOATHLETIC, INC.,
a Virginia corporation
By:___________________________________
Title:
LOGOATHLETIC HEADWEAR, INC.,
a Massachusetts corporation
By:___________________________________
Title:
CALIFORNIA SHIRT SALES, INC.
By: ___________________________________
Title:
20
BANKS:
- - ------
NATIONSBANK, N.A.,
individually in its capacity as a Bank
and in its capacity as Administrative Agent
By:___________________________________
Title:
FIRST UNION NATIONAL BANK ,
individually in its capacity as a Bank
and in its capacity as a Co-Agent
By:___________________________________
Title:
BANK OF TOKYO - MITSUBISHI TRUST COMPANY
By: ___________________________________
Title:
THE FIRST NATIONAL BANK OF CHICAGO
By: ___________________________________
Title:
PNC BANK, NATIONAL ASSOCIATION
By: ___________________________________
Title:
MORGAN GUARANTY TRUST COMPANY OF
NEW YORK
By: ___________________________________
Title:
21
Schedule 2.01(a)
-----------------
Schedule of Banks and
---------------------
Commitment
----------
Address Revolving Trade LOC Standby LOC
for Funding Address for Committed Committed Committed
Bank and Payments Other Notices Amount Amount Amount Percent
---- ------------ ------------- ------ ------ ------ -------
NationsBank, N.A. NationsBank, N.A NationsBank, N.A. $22,160,427.81 $13,850,267.38 $1,978,609.26 19.786096%
101 N. Tryon St. NationsBank Corporate
Independence Center Center, 8th Floor
NC1-001-15-04 NC1-007-08-11
Charlotte, NC 28255 100 N. Tryon St.
Attn: Mike Stearns Charlotte, NC 28255
Phone: (704)386-9046 Attn: E. Phifer Helms
Fax: (704)386-9973 Phone: (704)386-5358
Fax: (704)386-1270
First Union National First Union National
Bank Bank
301 S. College Street $47,914,438.50 $11,229,946.53 $1,604.278.08 42.780749%
DC-5
Charlotte, NC 28288-0767
Attn: Chris Ulrich
Phone: (704)715-1057
Fax: (704)374-3300
The First National The First National
Bank of Chicago Bank of Chicago $14,973,262.03 $9,358,288.77 $1,336,898.40 13.368984%
One First National Plaza
Suite 0167
Chicago, IL 60670
Attn: Courtenay Wood
Phone: (312)732-1563
Fax: (312)732-5435
22
Schedule 2.01(a)
-----------------
Schedule of Banks and
---------------------
Commitment
----------
Address Revolving Trade LOC Standby LOC
for Funding Address for Committed Committed Committed
Bank and Payments Other Notices Amount Amount Amount Percent
---- ------------ ------------- ------ ------ ------ -------
Bank of Tokyo- Bank of Tokyo -
Mitsubishi Trust Mitsubishi Trust Company
Company 1251 Avenue of the
Americas $8,983,957.22 $5,614,973.26 $802,139.04 8.021390%
New York, NY 10020-
1104
Attn: Rolando Uy
Phone: (212)413-8570
Fax: (212) 766-3127
PNC Bank, N.A. PNC Bank, N.A. $8,983,957.22 $5,614,973.26 $802,139.04 8.021390%
249 Fifth Avenue
Pittsburgh, PA 15222
Attn: Rose M. Crump
Phone: (412)762-2539
Fax: (412)762-6484
Morgan Guaranty Trust Morgan Guaranty Trust $8,983,957.22 $5,614,973.26 $802,139.04 8.021390%
Company of New York Company of New York
60 Wall Street,
22nd Floor
New York, NY 10260
Attn: David Common
Phone: (212)648-3319
Fax: (212)648-5336
------------ ------------- ------------- -----------
$112,000,000.00 $70,000,000.00 $10,000,000.00 100.000000%
23
Schedule I
----------
Form of Backup Letter of Credit
Exhibit 10.2
AMENDMENT, CONSENT AND WAIVER NO. 4
THIS AMENDMENT, CONSENT AND WAIVER NO. 4 dated as of November 16, 1998
(the "Amendment") relating to the Credit Agreement referenced below, by and
among TULTEX CORPORATION, a Virginia corporation (the "Borrower"), the
Guarantors and Banks identified therein, and NATIONSBANK, N.A., as
Administrative Agent (the "Administrative Agent"). Terms used but not otherwise
defined shall have the meanings provided in the Credit Agreement.
W I T N E S S E T H
WHEREAS, a $187 million credit facility has been extended to Tultex
Corporation pursuant to the terms of that Credit Agreement dated as of May 15,
1997 (as amended and modified the "Credit Agreement") among Tultex Corporation,
the Guarantors and Banks identified therein, Corestates Bank, N.A. and First
Union National Bank of Virginia, as co-agents and NationsBank, N.A., as
Administrative Agent;
WHEREAS, the credit facility was permanently reduced to $112 million
pursuant to the Consent dated as of May 8, 1998;
WHEREAS, the Borrower has requested certain modifications under of the
Credit Agreement;
WHEREAS, such modification and waiver requires the consent of the Required
Banks;
WHEREAS, the Required Banks have consented to the requested modifications
and waiver on the terms and conditions set forth herein;
24
NOW, THEREFORE, IN CONSIDERATION of the premises and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:
1. The Credit Agreement is amended and modified in the following respects:
1.1 In Section 1.1, the pricing grid in the definition of
"Applicable Percentage" is amended to read as follows:
25
Applicable Percentage
----------------------------
Eurodollar Loans Standby
Consolidated and Letter of
Leverage Fed Funds Adjusted CD Credit Commitment
Ratio Swingline Loans Loans Fee Fee
----- --------------- ------ -------- ------
> 6.50 3.50% 3.625% 3.50% 0.500%
>6.50 but > 5.75 2.50% 2.625% 2.50% 0.500%
-
< 5.75 but > 5.00 2.25% 2.375% 2.25% 0.500%
-
< 5.00 but > 4.25 2.00% 2.125% 2.00% 0.375%
-
< 4.25 but > 3.50 1.75% 1.875% 1.75% 0.375%
-
< 3.50 but > 2.75 1.50% 1.625% 1.50% 0.250%
-
< 2.75 1.25% 1.375% 1.25% 0.250%
-
1.2 The aggregate Revolving Committed Amount is hereby permanently
reduced to Eighty-Seven Million Five Hundred Thousand Dollars ($87,500,000) and
the proviso of the first sentence of Section 2.1 is amended to read as follows:
; provided, however, (i) with regard to the Banks collectively, the
amount of Committed Revolving Loans outstanding shall not at any time
exceed EIGHTY-SEVEN MILLION FIVE HUNDRED THOUSAND DOLLARS ($87,500,000) in
the aggregate (as such aggregate maximum amount may be reduced from time
to time as hereinafter provided, the "Revolving Committed Amount"),
provided that the Obligations outstanding hereunder shall not, without the
prior written consent of the Required Lenders, at any date specified below
exceed the amounts shown below (on any day, the lesser of the Revolving
Committed Amount or the amounts shown below hereafter shall be referred to
as the "Available Revolving Committed Amount"):
on the on the
Last Business Day of Last Business Day of
the Fiscal Quarter the Fiscal Quarter
ending on the date ending on the date
shown below shown below
----------- ------------
December 5, 1998 $66,800,000 July 3, 1999 $62,600,000
January 1, 1999 $57,800,000 August 7, 1999 $82,900,000
February 2, 1999 $50,500,000 September 4, 1999 $87,500,000
March 6, 1999 $44,900,000 October 2, 1999 $74,600,000
April 3, 1999 $39,600,000 November 6, 1999 $70,100,000
May 8, 1999 $47,900,000 December 4, 1999 $53,300,000
June 5, 1999 $56,900,000 January 1, 2000 $29,100,000
Thereafter the Revolving
Committed Amount
and (ii) with regard to each Bank individually, each such Bank's pro rata
share of outstanding Committed Revolving Loans plus Swingline Loans plus
LOC Obligations shall not any time
26
exceed such Bank's pro rata share of the aggregate Available Revolving
Committed Amount; and provided, further, that notwithstanding anything
herein to the contrary, the sum of Committed Revolving Loans plus
Swingline Loans plus LOC Obligations shall not at any time exceed the
aggregate Available Revolving Committed Amount.
1.3 The reference in clause (iii) of the proviso of the first
sentence of Section 2.07(a) to "aggregate Revolving Committed Amount" is amended
to read "aggregate Available Revolving Committed Amount".
1.4 The reference in clause (ii) of the proviso of the first
sentence of Section 2.08(a) to "Revolving Committed Amount" is amended to read
"aggregate Available Revolving Committed Amount".
1.5 In Section 2.09(a)(iii), the reference in clause (A) to "such
Bank's Revolving Committed Amount" is amended to read "such Bank's pro rata
share of the aggregate Available Revolving Committed Amount", and the reference
in clause (B)(I) to "aggregate Revolving Committed Amount" is amended to read
"aggregate Available Revolving Committed Amount".
1.6 In Section 2.11(b) there shall be inserted immediately following
the first sentence the following:
For purposes hereof, the unused amount of the Revolving Committed Amount
shall be the difference between (i) aggregate outstanding Committed
Revolving Loans and LOC Obligations and (ii) the aggregate Available
Revolving Committed Amount.
1.7 In clause (i) of Section 2.12(b) the reference to "aggregate
Revolving Committed Amount" is amended to read "aggregate Available Revolving
Committed Amount".
2. The Required Banks hereby waive any Default or Event of Default which
existed or may have existed at the end of the Borrower's third fiscal quarter of
1998 (September 30, 1998) solely on account of noncompliance with the Fixed
Charges Coverage Ratio under Section 6.11(c) and the Consolidated Leverage Ratio
under Section 6.11(e) of the Credit Agreement. This waiver is expressly limited
to the third fiscal quarter of 1998 ending September 30, 1998. This waiver does
not extend to any subsequent periods, as to which the Fixed Charges Coverage
Ratio or the Consolidated Leverage Ratio shall be in full force and effect as
provided in Section 6.11(c) and (d), respectively, of the Credit Agreement.
3. The Borrower hereby represents and warrants in connection herewith that
as of the date hereof (after giving effect hereto) (i) the representations and
warranties set forth in Section 5 of the Credit Agreement are true and correct
in all material respects (except those which expressly relate to an earlier
date), and (ii) no Default or Event of Default presently exists under the Credit
Agreement.
4. The effectiveness of this Amendment is subject to satisfaction of the
following conditions:
27
(a) receipt by the Administrative Agent of copies of this Amendment
executed by the Credit Parties and Required Lenders;
(b) receipt by the Administrative Agent of corporate resolutions and
legal opinions relating to this Amendment in form and substance
satisfactory to the Administrative Agent and Required Lenders; and
(c) receipt by the Administrative Agent of an amendment fee of 12.5
b.p.s. on the Revolving Committed Amount of each of the Lenders approving
this Amendment.
5. Except as expressly modified hereby, all of the terms and provisions of
the Credit Agreement remain in full force and effect.
6. The Borrower agrees to pay all reasonable costs and expenses in
connection with the preparation, execution and delivery of this Amendment,
including the reasonable fees and expenses of the Administrative Agent's legal
counsel.
7. This Amendment may be executed in any number of counterparts, each of
which when so executed and delivered shall be deemed an original. It shall not
be necessary in making proof of this Amendment to produce or account for more
than one such counterpart.
8. This Amendment, as the Credit Agreement, shall be deemed to be a
contract under, and shall for all purposes be construed in accordance with, the
laws of the Commonwealth of Virginia.
[Remainder of Page Intentionally Left Blank]
28
IN WITNESS WHEREOF, each of the parties hereto has caused a counterpart of
this Amendment to be duly executed and delivered as of the date first above
written.
BORROWER: TULTEX CORPORATION,
- - -------- a Virginia Corporation
By:___________________________________
Title:
GUARANTORS:
- - ----------
DOMINION STORES, INC.,
a Virginia corporation
By:___________________________________
Title:
LOGOATHLETIC, INC.,
a Virginia corporation
By:___________________________________
Title:
LOGOATHLETIC HEADWEAR, INC.,
a Massachusetts corporation
By:___________________________________
Title:
CALIFORNIA SHIRT SALES, INC.
By: ___________________________________
Title:
BANKS:
- - -----
NATIONSBANK, N.A.,
individually in its capacity as a Bank
and in its capacity as Administrative Agent
By:___________________________________
29
Title:
FIRST UNION NATIONAL BANK ,
individually in its capacity as a Bank
and in its capacity as a Co-Agent
By:___________________________________
Title:
BANK OF TOKYO - MITSUBISHI TRUST COMPANY
By: ___________________________________
Title:
THE FIRST NATIONAL BANK OF CHICAGO
By: ___________________________________
Title:
PNC BANK, NATIONAL ASSOCIATION
By: ___________________________________
Title:
MORGAN GUARANTY TRUST COMPANY OF
NEW YORK
By: ___________________________________
Title: