-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, DUoiHHCVty0NOJ4zOJEgstCFPxDdN1DaVBQTpkfgcQtzqPYZqQm2kbGyYODmieuf 1/laWbkRQ7xaQBEus7wi6Q== 0000049401-97-000015.txt : 19970819 0000049401-97-000015.hdr.sgml : 19970819 ACCESSION NUMBER: 0000049401-97-000015 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19970704 FILED AS OF DATE: 19970818 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: HYDE ATHLETIC INDUSTRIES INC CENTRAL INDEX KEY: 0000049401 STANDARD INDUSTRIAL CLASSIFICATION: RUBBER & PLASTICS FOOTWEAR [3021] IRS NUMBER: 041465840 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-05083 FILM NUMBER: 97665689 BUSINESS ADDRESS: STREET 1: 13 CENTENNIAL DR STREET 2: CENTENNIAL INDUSTRIAL PK CITY: PEABODY STATE: MA ZIP: 01961 BUSINESS PHONE: 5085329000 MAIL ADDRESS: STREET 1: 13 CENTENNIAL DRIVE STREET 2: CENTENNIAL INDUSTRIAL PARK CITY: PEABODY STATE: MA ZIP: 01960 FORMER COMPANY: FORMER CONFORMED NAME: HYDE A R & SONS CO DATE OF NAME CHANGE: 19701030 10-Q 1 2ND QUARTER 10Q 1997 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 July 4, 1997 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 0-05083 HYDE ATHLETIC INDUSTRIES, INC. (Exact name of registrant as specified in its charter) Massachusetts 04-1465840 (State or other jurisdiction of (I.R.S. employer identification number) incorporation or organization) Centennial Industrial Park, 13 Centennial Drive, Peabody, MA 01960 (Address of principal executive offices) 508-532-9000 (Registrant's telephone number (including area code) 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 [ ] Class Outstanding as of August 11, 1997 Class A Common Stock-$.33 1/3 Par Value 2,703,227 Class B Common Stock-$.33 1/3 Par Value 3,533,659 --------- 6,236,886 HYDE ATHLETIC INDUSTRIES, INC. AND SUBSIDIARIES INDEX PART I. FINANCIAL INFORMATION Item 1. Financial Statements Condensed Consolidated Balance Sheets as of July 4, 1997 and January 3, 1997 Condensed Consolidated Statements of Income for the thirteen weeks and twenty-six weeks ended July 4, 1997 and July 5, 1996 Condensed Consolidated Statements of Stockholders' Equity for the twenty-six weeks ended July 4, 1997 and July 5, 1996 Condensed Consolidated Statements of Cash Flows for the twenty-six weeks ended July 4, 1997 and July 5, 1996 Notes to Condensed Consolidated Financial Statements -- July 4, 1997 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations PART II. OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security-Holders Item 6. Exhibits and Reports on Form 8-K Signature HYDE ATHLETIC INDUSTRIES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) ASSETS
July 4, January 3, 1997 1997 ---- ---- - --- Current assets Cash and cash equivalents $ 2,845,496 $ 2,802,864 Marketable securities 178,359 236,128 Accounts receivable 22,319,247 17,360,883 Inventories 25,644,331 24,537,442 Prepaid expenses and other current assets 4,266,083 2,812,530 Net assets of discontinued operations -- 9,870,950 ----------------- ----------------- Total current assets 55,253,516 57,620,797 ----------------- ----------------- Property, plant, and equipment, net 8,117,184 9,027,414 ----------------- ----------------- Other assets 3,746,851 4,490,407 ----------------- ----------------- Total assets $ 67,117,551 $ 71,138,618 ================= ================= LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities Notes payable $ 3,251,569 $ 4,237,083 Current maturities of long-term debt 3,960,467 2,448,615 Accounts payable 3,546,123 3,750,364 Accrued expenses and other current liabilities 3,347,998 3,319,613 ----------------- ----------------- Total current liabilities 14,106,157 13,755,675 ----------------- ----------------- Long-term debt 1,129,184 4,892,753 ----------------- ----------------- Deferred income taxes 1,711,772 1,923,708 ----------------- ----------------- Minority interest in consolidated subsidiaries 278,349 487,865 ----------------- ----------------- Stockholders' equity Common stock, $.33 1/3 par value 2,145,095 2,145,095 Additional paid in capital 15,581,353 15,581,353 Retained earnings 33,519,563 33,704,957 Accumulated translation (255,788) (233,654) ------------------ ------------------ Total 50,990,223 51,197,751 Less: Common stock held in treasury, at cost (1,053,790) (1,053,790) Unearned compensation (44,344) (65,344) ------------------ ------------------ Total stockholders' equity 49,892,089 50,078,617 ----------------- ----------------- Total liabilities and stockholders' equity $ 67,117,551 $ 71,138,618 ================= ================= See notes to condensed consolidated financial statements
HYDE ATHLETIC INDUSTRIES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME FOR THE THIRTEEN WEEKS AND TWENTY-SIX WEEKS ENDED JULY 4, 1997 AND JULY 5, 1996 (Unaudited)
13 Weeks 13 Weeks 26 Weeks 26 Weeks Ended Ended Ended Ended July 4, 1997 July 5, 1996 July 4, 1997 July 5, 1996 ------------ ------------ ------------ ------------ Net sales $ 24,398,108 $ 24,396,131 $ 49,615,232 $ 53,034,443 Other income (expense) 100,793 355,361 (50,340) 593,954 --------------- ---------------- ---------------- -------------- Total revenue 24,498,901 24,751,492 49,564,892 53,628,397 --------------- ---------------- --------------- -------------- Costs and expenses Cost of sales 15,847,965 16,853,837 32,480,429 36,703,190 Selling expenses 4,564,961 4,477,680 8,528,953 8,701,140 General and administrative expenses 3,458,524 2,740,243 6,692,373 5,647,705 Writedown of assets 850,000 0 850,000 0 Interest expense 250,954 222,482 500,055 479,273 --------------- ---------------- --------------- -------------- Total costs and expenses 24,972,404 24,294,242 49,051,810 51,531,308 --------------- ---------------- --------------- -------------- Income (loss) from continuing operations before income taxes and minority interest (473,503) 457,250 513,082 2,097,089 Provision (benefit) for income taxes (171,341) 136,305 210,877 757,543 Minority interest in income (loss) of consolidated subsidiaries (181,909) 93,466 (147,366) 228,877 ---------------- ---------------- ---------------- -------------- Income (loss) from continuing operations (120,253) 227,479 449,571 1,110,669 Discontinued operations: Loss from discontinued operation (net of tax benefit of $71,840, $74,996, $262,084 and $169,616, respectively) 107,313 113,786 393,936 257,507 Loss on disposal of Brookfield Athletic Co., Inc. including operating loss of $93,634 during the phase-out period (net of tax benefit of $153,440) 241,029 0 241,029 0 --------------- ---------------- --------------- -------------- Net income (loss) $ (468,595) $ 113,693 $ (185,394) $ 853,162 ================ ================ ================ ============== Per share amounts: Net income (loss) from continuing operations $ (0.02) $ 0.04 $ 0.07 $ 0.18 Loss from discontinued operations (0.05) (0.02) (0.10) (0.04) ---------------- ---------------- ---------------- --------------- Net income (loss) $ (0.07) $ 0.02 $ (0.03) $ 0.14 ================ =============== ================ ============== Weighted average common shares and equivalents outstanding 6,273,923 6,244,225 6,271,885 6,235,093 =============== ================ =============== ============== Cash dividends per share of common stock 0 0 0 0 =============== ================ =============== ============== See notes to condensed consolidated financial statements
HYDE ATHLETIC INDUSTRIES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY FOR THE TWENTY-SIX WEEKS ENDED JULY 4, 1997 AND JULY 5, 1996 (Unaudited)
Common Stock Paid-In Retained Class A Class B Capital Earnings ------ ------ ------ -------- Balance, January 5, 1996 $ 901,575 $ 1,236,939 $ 15,521,470 $ 32,210,867 Amortization of unearned compensation -- -- -- -- Net income (loss) -- -- -- 853,162 Foreign currency translation adjustments -- -- -- -- ----------- ------------- ------------- ------------- Balance, July 5, 1996 $ 901,575 $ 1,236,939 $ 15,521,470 $ 33,064,029 =========== ============= ============= ============= Balance, January 3, 1997 $ 902,075 $ 1,243,020 $ 15,581,353 $ 33,704,957 Amortization of unearned compensation -- -- -- -- Net income (loss) -- -- -- (185,394) Foreign currency translation adjustments -- -- -- -- ----------- ------------- ------------- ------------- Balance, July 4, 1997 $ 902,075 $ 1,243,020 $ 15,581,353 $ 33,519,563 =========== ============= ============= ============= Treasury Stock Unearned Accumulated Stockholders' Shares Amount Compensation Translation Equity ------ ------ ------------ ---------- ------ Balance, January 5, 1996 198,400 $ (1,053,790) $ (194,313) $ (257,694) $ 48,365,054 Amortization of unearned compensation -- -- 64,350 -- 64,350 Net income (loss) -- -- -- -- 853,162 Foreign currency translation adjustments -- -- -- 94,512 94,512 ----------- ------------- ------------- ------------- ------------- Balance, April 5, 1996 198,400 $ (1,053,790) $ (129,963) $ (163,182) $ 49,377,078 =========== ============== ============== ============= ============= Balance, January 3, 1997 198,400 $ (1,053,790) $ (65,344) $ (233,654) $ 50,078,617 Amortization of unearned compensation -- -- 21,000 -- 21,000 Net income (loss) -- -- -- -- (185,394) Foreign currency translation adjustments -- -- -- (22,134) (22,134) ----------- ------------- ------------- -------------- -------------- Balance, July 4, 1997 198,400 $ (1,053,790) $ (44,344) $ (255,788) $ 49,892,089 =========== ============== ============== ============== ============= See notes to condensed consolidated financial statements.
HYDE ATHLETIC INDUSTRIES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE TWENTY-SIX WEEKS ENDED JULY 4, 1997 AND JULY 5, 1996 INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (Unaudited)
July 4, July 5, 1997 1996 ---- ---- Cash flows from operating activities: Net income (loss) $ (185,394) $ 853,162 ----------------- --------------- Adjustments to reconcile net income to net cash Provided (used) by operating activities: Discontinued operations 634,965 257,507 Depreciation and amortization 720,073 664,546 Deferred income tax benefit (1,023,724) (88,794) Provision for bad debts and discounts 2,927,349 3,020,516 Minority interest in consolidated subsidiaries income (loss) (147,366) 228,877 Compensation from stock grants and stock options 21,000 64,350 (Gain) loss on sale of equipment (2,944) 4,372 Writedown of assets 850,000 -- Changes in operating assets and liabilities, net of effects of acquisitions, dispositions and foreign currency adjustments: Decrease (increase) in assets: Marketable securities 57,769 3,828 Accounts receivable (6,479,126) (13,259,758) Inventories (1,580,689) 4,048,813 Prepaid expenses and other current assets (554,400) 21,212 Increase (decrease) in liabilities: Accounts payable (101,475) 31,237 Accrued expenses 283,229 1,173,447 ---------------- --------------- Total adjustments (4,395,339) (3,829,847) ----------------- ---------------- Net cash used by continuing operations (4,580,733) (2,976,685) Net cash provided (used) by discontinued operations 2,156,848 (2,212,637) ---------------- ---------------- Net cash used by operating activities (2,423,885) (5,189,322) ----------------- ---------------- Cash flows from investing activities: Purchases of property, plant and equipment (484,741) (300,489) Increase in deferred charges, deposits and other (363,676) (402,168) Proceeds from sale of Brookfield Athletic Co., Inc. 6,000,000 -- Proceeds from sale of equipment 2,960 76,896 ---------------- --------------- Net cash provided (used) by investing activities 5,154,543 (625,761) ---------------- ---------------- Cash flows from financing activities: Net short-term borrowings (869,853) (323,505) Repayment of long term debt and capital lease obligations (2,222,864) (2,142,613) Proceeds from long-term borrowings -- 419,766 ---------------- --------------- Net cash used by financing activities (3,092,717) (2,046,352) Effect of exchange rate changes on cash and cash equivalents 404,691 11,834 ---------------- --------------- Net increase (decrease) in cash and cash equivalents 42,632 (7,849,601) Cash and equivalents at, beginning of period 2,802,864 11,668,316 ---------------- --------------- Cash and equivalents at, end of period $ 2,845,496 $ 3,818,715 ================ =============== Supplemental disclosure of cash flow information: Cash paid during the period for: Incomes taxes, net of refunds $ 196,039 $ 405,113 ================ =============== Interest $ 545,872 $ 488,313 ================ =============== Non-cash investing and financing activities: Property purchased under capital leases $ 65,789 $ 1,108,510 ================ =============== See notes to condensed consolidated financial statements
HYDE ATHLETIC INDUSTRIES, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS July 4, 1997 (Unaudited) NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES BASIS OF PRESENTATION The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and, therefore, do not include all information and footnotes necessary for a fair presentation of financial position, results of operations, and cash flows in conformity with generally accepted accounting principles. In the opinion of Management, all adjustments (consisting solely of normal recurring adjustments) necessary for a fair presentation have been included. These interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the notes, thereto, included in the Company's Annual Report on Form 10-K, as filed with the Securities and Exchange Commission, for the year ended January 3, 1997. Operating results for thirteen weeks ended July 4, 1997, are not necessarily indicative of the results for the entire year. NOTE B - INVENTORIES Inventories at July 4, 1997 and January 3, 1997 consisted of the following: July 4, January 3, 1997 1997 ---- ---- Finished Goods $19,942,030 $18,214,736 Work in Process 88,559 110,559 Raw Materials 5,613,742 6,212,147 ----------- ----------- $25,644,331 $24,537,442 =========== =========== NOTE C - DISCONTINUED OPERATIONS On July 4, 1997, the Brookfield Athletic Company, Inc., ("Brookfield") a wholly- owned subsidiary of the Company, sold substantially all of the assets used in its business to Brookfield International Inc. The consideration payable equals the net asset value of the assets as of July 4, 1997, as reflected in the Closing Balance Sheet to be prepared and audited within 60 days after the effective date reduced by certain liabilities set forth in the Closing Balance Sheet, which are being assumed by Brookfield International, Inc. The selling price for Brookfield is approximately $7,186,958. At July 4, 1997, $1,186,958 was included in accounts receivable as due from Brookfield International, Inc., which represents the selling price reduced by an initial payment of $6,000,000, which was received on July 2, 1997. The summarized balance sheet for the discontinued operations as of January 3, 1997 is as follows: Assets Current assets Accounts receivable $ 5,479,278 Inventories 4,095,069 Prepaid expenses 490,907 ------------ Total current assets $ 10,065,254 Property, plant and equipment, net 190,054 Other assets 68,750 ------------ Total assets $ 10,324,058 ------------ Liabilities Current liabilities Current portion of long-term debt $ 35,844 Accounts payable 219,830 Accrued expenses 197,434 ------------ Total liabilities $ 453,108 ------------ Net assets of discontinued operations $ 9,870,950 ============ As of January 3, 1997, the net sales of the discontinued operation have been reclassified and are reflected in current assets in the Condensed Consolidated Balance Sheet as of that date. As a result of the sale, the Company recorded a pre-tax loss of $394,469 ($241,029 after tax or $0.04 per share). The pre-tax loss includes $300,835 of estimated costs incurred in connection with the disposal of Brookfield, as well as operating losses of $93,634, incurred by Brookfield subsequent to the transactions measurement date. The results of operations of Brookfield for the thirteen weeks and the twenty- six weeks ended July 4, 1997 have been segregated from continuing operations and are reported separately as discontinued operations. Prior year Consolidated Statements of Earnings for the comparable periods have been restated to present Brookfield as a discontinued operation. The following is a summary of Brookfield's results of operations for the thirteen weeks and twenty-six weeks ended July 4, 1997 and July 5, 1996:
Thirteen Thirteen Twenty-Six Twenty-Six Weeks Weeks Weeks Weeks Ended Ended Ended Ended July 4, 1997 July 5, 1996 July 4, 1997 July 5, 1996 ------------ ------------ ------------ ------------ Net revenues $ 395,060 $ 4,657,091 $ 2,381,093 $ 7,921,733 Costs and expenses 574,213 4,845,873 3,037,113 8,348,856 ------------- ------------- ------------- ------------- Income (loss) before income taxes (179,153) (188,782) (656,020) (427,123) Provision (benefit) for income taxes (71,840) (74,996) (262,084) (169,616) -------------- -------------- -------------- -------------- Income (loss) from discontinued operations (107,313) (113,786) (393,936) (257,507) Loss on disposal of Brookfield Athletic Company, Inc., assets including operating loss of $93,634 during the phase out period (net of tax benefit of $153,440) (241,029) 0 (241,029) 0 -------------- ------------- -------------- ------------- Loss from discontinued operations $ (348,342) $ (113,786) $ (634,965) $ (257,507) ============== ============== ============== ==============
NOTE D - NEW ACCOUNTING PRONOUNCEMENTS During the first quarter of 1997, the Financial Accounting Standards Board issued Financial Accounting Standards No. 128 "Earnings Per Share" (SFAS 128). SFAS 128 is intended to improve the Earnings Per Share ("EPS") information contained in the financial statements by simplifying the calculation of earnings per share, revising the disclosure requirements, and achieving comparability with international accounting standards. SFAS 128 is effective after December 15, 1997. The Company will incorporate SFAS 128 into the Form 10-K filing, with the Securities and Exchange Commission, for the year ended January 2, 1998. The Company has not determined the impact of adopting SFAS 128 on the consolidated financial statements for the fiscal year ended January 2, 1998. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following table sets forth net sales and percentages of net sales of the Company's product lines in the thirteen weeks and twenty-six weeks ended July 4, 1997 and July 5, 1996: Thirteen Weeks Ended July 4, 1997 and July 5, 1996 --------------------------------------------------
1997 1996 ------------------------------ ----------------------------- $ % $ % Saucony $ 21,139,000 86.6% $ 21,177,000 86.8% Other 3,259,000 13.4% 3,219,000 13.2% --------------- ------- --------------- ------- Total $ 24,398,000 100.0% $ 24,396,000 100.0% =============== ======= =============== ======= Twenty-Six Weeks Ended July 4, 1997 and July 5, 1996 ---------------------------------------------------- 1997 1996 ------------------------------ ----------------------------- $ % $ % Saucony $ 42,405,000 85.5% $ 46,886,000 88.4% Other 7,210,000 14.5% 6,148,000 11.6% --------------- ------- --------------- ------- Total $ 49,615,000 100.0% $ 53,034,000 100.0% =============== ======= =============== =======
Thirteen Weeks Ended July 4, 1997 Compared to Thirteen Weeks Ended July 5, 1996 - ------------------------------------------------------------------------------- The Company's net sales increased to $24,398,000 in the thirteen weeks ended July 4, 1997 from $24,396,000 in the thirteen weeks ended July 5, 1996. Net sales of the Company's Saucony products decreased 0.2% to $21,139,000 in the thirteen weeks ended July 4, 1997 from $21,177,000 in the thirteen weeks ended July 5, 1996, due to decreased unit shipment volume. Saucony domestic net sales increased 4% to $16,260,000 in the thirteen weeks ended July 4, 1997 from $15,688,000 in the thirteen weeks ended July 5, 1996, due to higher selling prices of the Company's recently introduced products. Saucony foreign net sales decreased 11% to $4,879,000 in the thirteen weeks ended July 4, 1997 from $5,489,000 in the thirteen weeks ended July 5, 1996, due primarily to decreased unit shipment volume, lower selling prices and to a lesser extent, unfavorable currency exchange. Net sales of other products increased 1% to $3,259,000 in the thirteen weeks ended July 4, 1997 from $3,219,000 in the thirteen weeks ended July 5, 1996, due to increased sales realized by the Company's retail outlets, increased sales by the Company's wholly-owned subsidiary, Quintana Roo, Inc. and sales of Hind apparel, which were offset to some extent by decreased sales of non-corporate brands realized by the Company's Australian subsidiary. The Company acquired trademarks and related intellectual property from Hind, Inc. in December 1996. Other income decreased 72% to $101,000 in the thirteen weeks ended July 4, 1997 from $355,000 in the thirteen weeks ended July 5, 1996 due to foreign currency transaction losses, on U.S. dollar denominated obligations held by certain of the Company's foreign subsidiaries, reduced income due to lower levels of short- term cash investments, reduced royalty income, the partial writedown of the Company's investment in a limited partnership and the recognition of a litigation settlement in the thirteen weeks ended July 5, 1996. The Company's gross profit increased to $8,550,000 in the thirteen weeks ended July 4, 1997 from $7,542,000 in the thirteen weeks ended July 5, 1996. The Company's gross margin percent increased to 35.0% in the thirteen weeks ended July 4, 1997 from 30.9% in the thirteen weeks ended July 5, 1996 due primarily to increased margin for Saucony products. The gross margin for Saucony products realized in the thirteen weeks ended July 5, 1996 was significantly lowered by increased unit volume of slow-moving, non-current models and decreased sales of lower-margin special makeup footwear. These factors, and to a lesser extent, decreased freight costs and reduced manufacturing costs, primarily account for the gross margin increase for Saucony products realized in the thirteen weeks ended July 4, 1997. The gross margin decrease for other products is due to the liquidation of inventory by the Company's Australian subsidiary as a result of the termination of exclusive distribution rights of another manufacturer's sporting goods brand in Australia. Selling, general and administrative expenses increased to $8,023,000, or 32.9% of net sales, in the thirteen weeks ended July 4, 1997 from $7,218,000, or 29.6% of net sales, in the thirteen weeks ended July 5, 1996. Advertising and promotion expenses decreased $134,000 in the thirteen weeks ended July 4, 1997 due primarily to decreased Saucony domestic television and print media advertising, offset in part by increased race promotion. Selling expenses increased by $221,000 in the thirteen weeks ended July 4, 1997, due to increased sales commissions on higher sales of Saucony first quality products, increased payroll costs, and selling and marketing expenses related to the introduction of Hind apparel. General and administrative expenses increased $718,000 in the thirteen weeks ended July 4, 1997, due to increased professional fees relating to litigation expenses, increased costs related to the Company's upgraded information system, and administrative costs attributable to the introduction of Hind apparel. Foreign administrative costs increased due to increased staffing at certain of the Company's foreign subsidiaries. The Company recorded a non-recurring charge of $850,000 ($508,167 after tax or $0.08 per share), in the thirteen weeks ended July 4, 1997, to reduce the carrying value of the Company's distribution facility in East Brookfield, Massachusetts to market. Interest expense increased 13% to $251,000 in the thirteen weeks ended July 4, 1997 from $222,000 in the thirteen weeks ended July 5, 1996 due to increased borrowings on the Company's credit facility and increased asset-based borrowing. The provision (benefit) for income taxes declined to ($171,000) in the thirteen weeks ended July 4, 1997 from $136,000 in the thirteen weeks ended July 5, 1996 due to a decrease in the Company's pre-tax earnings. The effective tax rate increased by 6.4% to 36.2% in the thirteen weeks ended July 4, 1997 from 29.8% in the thirteen weeks ended July 5, 1996. The increase resulted from a shift in the composition of foreign and domestic pretax profits. Twenty-Six Weeks Ended July 4, 1997 Compared to Twenty-Six Weeks Ended July 5, 1996 The Company's net sales decreased 6.4% to $49,615,000 in the twenty-six weeks ended July 4, 1997 from $53,034,000 in the twenty-six weeks ended July 5, 1996. Net sales of the Company's Saucony products decreased 10% to $42,405,000 in the twenty-six weeks ended July 4, 1997 from $46,886,000 in the twenty-six weeks ended July 5, 1996, due to decreased unit shipment volume. Saucony domestic net sales decreased 9% to $31,174,000 in the twenty-six weeks ended July 4, 1997 from $34,257,000 in the twenty-six weeks ended July 5, 1996, due to decreased unit shipment volume of non-current models and decreased unit volumes of special makeup models, offset in part by higher selling prices of the Company's recently introduced products. Saucony foreign net sales decreased 11% to $11,231,000 in the twenty-six weeks ended July 4, 1997 from $12,629,000 in the twenty-six weeks ended July 5, 1996, due primarily to decreased unit shipment volume, lower selling prices and to a lesser extent, unfavorable currency exchange. Net sales of other products increased 17% to $7,210,000 in the twenty-six weeks ended July 4, 1997 from $6,148,000 in the twenty-six weeks ended July 5, 1996, due primarily to increased sales of non-corporate brands realized by the Company's Australian subsidiary and to a lesser extent increased sales realized by the Company's retail outlets, increased sales by the Company's wholly-owned subsidiary, Quintana Roo, Inc. and sales of Hind apparel. The Company acquired trademarks and related intellectual property from Hind, Inc. in December 1996. Other income (expense) decreased 108% to ($50,000) in the twenty-six weeks ended July 4, 1997 from $594,000 in the twenty-six weeks ended July 5, 1996, due to foreign currency transaction losses on U.S. dollar denominated obligations held by certain of the Company's foreign subsidiaries, reduced income due to lower levels of short-term cash investments, reduced royalty income, the partial writedown of the Company's investment in a limited partnership and the recognition of a litigation settlement in the twenty-six weeks ended July 5, 1996. The Company's gross profit increased to $17,135,000 in the twenty-six weeks ended July 4, 1997 from $16,331,000 in the twenty-six weeks ended July 5, 1996. The Company's gross margin percent increased to 34.5% in the twenty-six weeks ended July 4, 1997 from 30.8% in the twenty-six weeks ended July 5, 1996 due primarily to increased margin for Saucony products. The gross margin for Saucony products realized in the twenty-six weeks ended July 5, 1996 was significantly lowered by increased unit volume of slow-moving, non-current models and decreased sales of lower-margin special makeup footwear. These factors, and to a lesser extent, decreased freight costs and reduced manufacturing costs, primarily account for the gross margin increase for Saucony products realized in the twenty-six weeks ended July 4, 1997. The gross margin decrease for other products is due to the liquidation of inventory by the Company's Australian subsidiary as a result of the termination of exclusive distribution rights of another manufacturer's sporting goods brand in Australia. Selling, general and administrative expenses increased to $15,221,000, or 30.7% of net sales, in the twenty-six weeks ended July 4, 1997 from $14,349,000, or 27.0% of net sales, in the twenty-six weeks ended July 5, 1996. Advertising and promotion expenses decreased $357,000 in the twenty-six weeks ended July 4, 1997 due primarily to decreased Saucony domestic television and print media advertising, decreased product literature, offset in part by increased race sponsorship. Selling expenses increased by $185,000 in the twenty-six weeks ended July 4, 1997, due to decreased sales commissions on lower sales of Saucony, offset by increased payroll costs, and selling and marketing expenses related to the introduction of Hind apparel. General and administrative expenses increased $1,044,000 in the twenty-six weeks ended July 4, 1997, due to increased professional fees, both domestic and foreign, increased costs related to the Company's upgraded information system, increased foreign costs for payroll due to increased staffing at certain of the Company's foreign subsidiaries and administrative cost associated with the introduction of Hind apparel. The Company recorded a non-recurring charge of $850,000 ($508,167 after tax or $0.08 per share) in the twenty-six weeks ended July 4, 1997, to reduce the carrying value of the Company's distribution facility in East Brookfield, Massachusetts to market. Interest expense increased 4% to $500,000 in the twenty-six weeks ended July 4, 1997 from $479,000 in the twenty-six weeks ended July 5, 1996, due to increased borrowings on the Company's credit facility and increased asset-based borrowing. The provision for income taxes declined to $211,000 in the twenty-six weeks ended July 4, 1997 from $758,000 in the twenty-six weeks ended July 5, 1996 due to a decrease in the Company's pre-tax earnings. The effective tax rate increased 5.0% to 41.1% in the twenty-six weeks ended July 4, 1997 from 36.1% in the twenty-six weeks ended July 5, 1996. The increase resulted from a shift in the composition of foreign and domestic pretax profits. LIQUIDITY AND CAPITAL RESOURCES As of July 4, 1997, the Company's cash and cash equivalents totaled $2,845,000, an increase of $43,000 from January 3, 1997. The increase was the result of the receipt of an initial payment of $6,000,000 from the sale of the net assets of the Company's wholly-owned subsidiary, Brookfield Athletic Company, Inc., offset in part by an increase in accounts receivable of $3,552,000, net of the provision for bad debts and discounts of $2,927,000 and an increase of $1,581,000 in inventory. The increase in accounts receivable is due to increased net sales of the Company's Saucony products in the twenty-six weeks ended July 4, 1997. The Company's days sales outstanding for its accounts receivable decreased to 79 days in the twenty-six weeks ended July 4, 1997 from 84 days in the twenty-six weeks ended July 5, 1996. Inventories increased in the twenty-six weeks ended July 4, 1997 due to the buildup of Hind apparel inventory. The Company's inventory turn ratio decreased to 2.6 turns in twenty- six weeks ended July 4, 1997 from 3.4 turns in the twenty-six weeks ended July 5, 1996, due to comparatively higher inventory levels, including the buildup of Hind apparel inventory, and the significant inventory reduction realized as the result of the sale of non-current Saucony models in the twenty-six weeks ended July 5, 1996. For the twenty-six weeks ended July 4, 1997, the Company used $2,324,000 of net cash to finance operating activities, expended $848,000 to acquire capital assets and information technology, decreased short-term borrowings by $870,000, and expended $2,223,000 to reduce long-term debt. Current maturities of long- term debt increased $1,512,000 in the 26 weeks ended July 4, 1997 due primarily to the reclassification of a note payable due on January 30, 1998 from long-term debt. Principal factors (other than net income, accounts receivable, provision for bad debts and discounts and inventory) affecting the operating cash flows in the twenty-six weeks ended July 4, 1997 included the loss of $635,000 from discontinued operations, the provision of $720,000 for depreciation and amortization, an increase in prepaid expenses of $554,000 (due to advance payments of certain advertising and selling expenses) and an increase in accrued expenses of $283,000 (due to increased advertising, promotional and administrative spending). The strengthening of the U.S. dollar during the twenty-six weeks ended July 4, 1997 increased the value of cash and cash equivalents by $405,000. As of July 4, 1997, the Company had various commitments for capital expenditures, including information technology. The Company plans to finance such expenditures with a mix of internally generated funds and asset-based lending. The Company believes that these commitments are not significant. The liquidity of the Company is contingent upon a number of factors, principally the Company's future operating results. Management believes that the Company's current cash and cash equivalents, credit facilities and internally generated funds are adequate to meet its working capital requirements and to fund its capital investment needs and debt service payments. INFLATION AND CURRENCY RISK The effect of inflation on the Company's results of operations over the past three years has been minimal. The impact of currency fluctuation on the purchase of inventory by the Company, from foreign suppliers, has been minimal as the transactions were denominated in U.S. dollars. The Company, however, is subject to currency fluctuation with respect to the operating results of the Company's foreign subsidiaries and certain foreign currency denominated payables. FASB 128 During the first quarter of 1997, the Financial Accounting Standards Board issued Financial Accounting Standards No. 128 "Earnings Per Share" (SFAS 128). SFAS 128 is intended to improve the Earnings Per Share ("EPS") information contained in the financial statements by simplifying the calculation of earnings per share, revising the disclosure requirements, and achieving comparability with international accounting standards. SFAS 128 is effective after December 15, 1997. The Company will incorporate SFAS 128 into the Form 10-K filing, with the Securities and Exchange Commission, for the year ended January 2, 1998. The Company has not determined the impact of adopting SFAS 128 on the consolidated financial statements for the fiscal year ended January 2, 1998. PART II. OTHER INFORMATION ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS At the 1997 Annual Meeting of Stockholders of the Company (the "Annual Meeting") held on May 15, 1997, the following matters were acted upon by the stockholders of the Company. 1. The election of James A. Buchanan, John H. Fisher, Phyllis H. Fisher, Charles A. Gottesman, Jonathan O. Lee and John J. Neuhauser as directors of the Company. 2. The authorization of an amendment to the Company's 1993 Equity Incentive Plan (the "Equity Incentive Plan") (i) increasing the number of shares issuable under the Equity Incentive Plan from 800,000 to 1,150,000 shares and (ii) increasing the number of shares from 75,000 to 150,000, in the aggregate, for which options or awards may be granted in any calendar year to any one person. 3. The ratification of the selection by the Board of Directors of Coopers & Lybrand L.L.P. as the Company's independent auditors for the current 1997 fiscal year. The results of the voting on each of the matters presented to stockholders at the Annual Meeting are set forth below: Votes Votes Broker For Against Abstentions Non-votes -- ------- ---------- -------- 1. Election of Directors James A. Buchanan 2,192,814 302,731 N.A. N.A. John H. Fisher 2,196,825 298,720 N.A. N.A. Phyllis H. Fisher 2,196,825 298,720 N.A. N.A. Charles A. Gottesman 2,196,825 298,720 N.A. N.A. Jonathan O. Lee 2,196,825 298,720 N.A. N.A. John J. Neuhauser 2,196,825 298,720 N.A. N.A. 2. Incentive Stock Plan Amendment 1,279,958 495,993 9,671 709,923 3. Ratification of Independent Auditors 2,436,162 52,610 6,773 N.A. PART II OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K a. Exhibits 11.00 - Computation of Earnings Per Share 27.00 - Financial Data Schedule b. Reports on Form 8-K. None. SIGNATURE Pursuant to the requirements 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. HYDE ATHLETIC INDUSTRIES, INC. Date: August 18, 1997 By: /s/Charles A. Gottesman ----------------------- Charles A. Gottesman Executive Vice President Chief Operating Officer (Duly authorized officer and principal financial officer) EX-11 2 HYDE ATHLETIC INDUSTRIES, INC. AND SUBSIDIARIES EXHIBIT 11 - COMPUTATION OF EARNINGS PER SHARE
For the For the Thirteen Weeks Ended Twenty-Six Weeks Ended -------------------- ---------------------- July 5, July 5, July 5, July 5, 1997 1996 1997 1996 ---- ---- ---- ---- PRIMARY Net income (loss) applicable to common stock $ (468,595) $ 113,693 $ (185,394) $ 853,162 ---------------- ---------------- ---------------- --------------- Weighted average shares: Average shares outstanding 6,236,886 6,217,142 6,236,886 6,217,142 Dilutive stock options based upon application of the treasury stock method using average market price 37,037 27,083 34,999 17,951 --------------- ---------------- --------------- --------------- Total shares 6,273,923 6,244,225 6,271,885 6,235,093 =============== ================ =============== =============== Net income (loss) per share $ (0.07) $ 0.02 $ (0.03) $ 0.14 ================ =============== ================ =============== FULLY DILUTED Net income (loss) applicable to common stock $ (468,595) $ 113,693 $ (185,394) $ 853,162 ---------------- ---------------- ---------------- --------------- Weighted average shares: Average shares outstanding 6,236,886 6,217,142 6,236,886 6,217,142 Dilutive stock options based upon application of the treasury stock method using market price at end of period or average market price, if greater 34,999 36,070 37,071 36,070 --------------- ---------------- --------------- --------------- Total shares 6,271,885 6,253,212 6,273,957 6,253,212 =============== ================ =============== =============== Net income (loss) per share $ (0.07) $ 0.02 $ (0.03) $ 0.14 ================ =============== ================ ===============
EX-27 3
5 This schedule contains summary financial information extracted from Hyde Athletic Industries, Inc. Form 10-Q for the period ended July 4, 1997 and is qualified in its entirety by reference to such 10-Q. 6-MOS JAN-02-1998 JUL-04-1997 2,845,496 178,359 22,319,247 491,543 25,644,331 55,253,516 16,093,512 7,976,328 67,117,551 14,106,157 1,129,184 0 0 2,145,095 47,746,994 67,117,551 49,615,232 49,564,892 32,480,429 32,480,429 16,071,326 167,467 500,055 513,082 210,877 449,571 (634,965) 0 0 (185,394) (0.03) (0.03)
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