-----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, BNWM21Hy99+VkcJ7iHo0PmDYua0Eujk7tXrcyUtQvm8LZfp68U+XHGjfgcZWvH0Z ZD0GqCc1FxowLzYdCrP4hA== 0000950168-97-003344.txt : 19971117 0000950168-97-003344.hdr.sgml : 19971117 ACCESSION NUMBER: 0000950168-97-003344 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19970930 FILED AS OF DATE: 19971114 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: PLUMA INC CENTRAL INDEX KEY: 0000829044 STANDARD INDUSTRIAL CLASSIFICATION: KNIT OUTERWEAR MILLS [2253] IRS NUMBER: 561541893 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-12763 FILM NUMBER: 97718305 BUSINESS ADDRESS: STREET 1: 801 FIELDCREST RD CITY: EDEN STATE: NC ZIP: 27288 BUSINESS PHONE: 9106354000 10-Q 1 PLUMA 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 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.........333-18755....................................... .....................................Pluma, Inc.......... (Exact name of registrant as specified in its charter) North Carolina 56-1541893 (State or other jurisdiction of incorporation (I.R.S. Employer or organization) Identification No.) ............................................................................. (Address of principal executive offices) (Zip Code) ...............801 Fieldcrest Road, Eden, North Carolina 27289................ (Registrant's telephone number, including area code) .............................(910) 635-4000.............................. (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 8,109,152 shares of common stock, no par value, as of November 14, 1997 1 PLUMA, INC. INDEX TO FORM 10-Q - ----------------------------------------------------------------------------- PART I - FINANCIAL INFORMATION
Page Item 1. Financial Statements Balance Sheets - September 30, 1997 and December 31, 1996 3 Statements of Operations - Three Months and Nine Months Ended September 30, 1997 and 1996 4 Statements of Cash Flows - Nine Months Ended September 30, 1997 and 1996 5 Notes to Financial Statements 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 8 PART II - OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K 10
2 PART I - FINANCIAL INFORMATION Item 1. Financial Statements
PLUMA, INC. Balance Sheets - ------------------------------------------------------------------------------------------------------------ (Unaudited) September 30, December 31, 1997 1996 Assets Current assets: Cash $ 138,802 $ 291,488 Accounts receivable (less allowance - 1997, 1,007,200 1996, $817,080) 41,161,412 22,545,795 Refundable income taxes 319,937 Deferred income taxes 1,305,967 1,509,535 Inventories 35,010,866 34,025,895 Other current assets 283,511 627,576 ----------- ---------- Total current assets 78,220,495 59,000,289 ----------- ---------- Property, plant and equipment: Land 599,978 599,978 Land improvements 719,699 678,160 Buildings and improvements 14,441,942 14,078,626 Machinery and equipment 40,158,662 31,753,681 ----------- ---------- Total property, plant and equipment 55,920,281 47,110,445 Less accumulated depreciation 20,485,339 17,468,062 ---------- ---------- Property, plant and equipment, net 35,434,942 29,642,383 ---------- ---------- Other assets 798,163 575,662 ----------- ---------- Total $ 114,453,600 $ 89,218,334 ----------- ---------- Liabilities and Shareholders' Equity Current liabilities: Current maturities of long-term debt $ 849,640 $ 849,640 Note payable 187,773 Accounts payable 6,725,626 4,456,770 Income taxes payable 371,500 Accrued expenses 4,039,718 3,421,181 --------- --------- Total current liabilities 11,802,757 9,099,091 --------- --------- Long-term debt 33,303,467 44,419,544 --------- --------- Deferred income taxes 3,658,918 3,556,806 --------- --------- Commitments and contingencies Shareholders' equity: Preferred stock, no par value, 1,000,000 shares authorized Common stock, no par value, 15,000,000 shares authorized, shares issued and outstanding - September 30, 1997, 8,109,152; 1996, 5,315,852 7,222,550 7,222,550 Paid-in-capital 29,626,577 Retained earnings 28,839,331 24,920,343 --------- --------- Total shareholders' equity 65,688,458 32,142,893 --------- --------- Total $ 114,453,600 $ 89,218,334 ========== =========
The accompanying notes are an integral part of this statement. 3 PLUMA, INC. Statements of Operations - -------------------------------------------------------------------------------
(Unaudited) (Unaudited) Three Months Nine Months Ended September 30, Ended September 30, 1997 1996 1997 1996 Net sales $ 38,965,527 $ 39,719,025 $ 99,477,525 $ 95,538,124 Cost of goods sold 34,068,210 32,126,408 84,714,875 80,907,717 ------------ ---------- ------------ ----------- Gross profit 4,897,317 7,592,617 14,762,650 14,630,407 Selling, general and administrative expenses 1,738,339 2,355,404 7,043,811 6,678,230 ------------ ---------- ------------ ----------- Income from operations 3,158,978 5,237,213 7,718,839 7,952,177 ------------ ---------- ------------ ----------- Other income (expenses): Interest expense (519,051) (1,027,667) (1,697,223) (2,846,085) Other income 158,139 118,714 407,878 359,606 ------------ ---------- ------------ ----------- Total other expenses, net (360,912) (908,953) (1,289,345) (2,486,479) ------------ ---------- ------------ ----------- Income before income taxes 2,798,066 4,328,260 6,429,494 5,465,698 ------------ ---------- ------------ ----------- Income taxes 1,029,688 1,592,800 2,366,054 2,011,377 ------------ ---------- ------------ ----------- Net income $ 1,768,378 $ 2,735,460 $ 4,063,440 $ 3,454,321 ------------ ---------- ------------ ----------- Earnings per common share and common equivalent - primary and fully diluted $ .22 $ .51 $ .55 $ .65 ------------ ---------- ------------ ----------- Weighted average number of shares outstanding 8,109,152 5,315,852 7,366,625 5,315,852 ------------ ---------- ------------ ----------- The accompanying notes are an integral part of this statement.
4 PLUMA, INC. Statements of Cash Flows - ------------------------------------------------------------------------------
(Unaudited) Nine Months Ended September 30, 1997 1996 Cash flows from operating activities: Net income $ 4,063,440 $ 3,454,321 Adjustments to reconcile net income to net cash used in operating activities: Provision for depreciation and amortization 3,018,571 2,832,072 Other, net (1,162) 4,038 Increase in accounts receivable (18,615,617) (13,038,484) Increase in deferred income taxes 305,680 1,099,933 Increase in inventories (984,971) (983,431) (Increase) decrease in other current assets 344,065 (286,529) Increase in accounts payable 2,268,856 2,666,946 (Increase) decrease in refundable income taxes (691,437) 1,140,257 Increase in accrued expenses 618,535 1,635,785 Decrease in note payable - related party sales agency - (1,999,000) ---------- ------------- Net cash used in operating activities (9,674,040) (3,474,092) ---------- ------------- Cash flows from investing activities: Purchases of property, plant and equipment (8,814,148) (1,974,263) Other, net (218,320) 10,073 ---------- ------------- Net cash used in investing activities (9,032,468) (1,964,190) ---------- ------------- Cash flows from financing activities: Repayment of subordinated debt (849,640) (849,640) Net borrowings from note payable 187,773 10,000,000 Net repayments of revolving loan (10,266,437) (3,818,453) Net proceeds from sale of common stock 29,626,577 - Payment of dividends (144,451) (433,353) ---------- ------------- Net cash provided by financing activities 18,553,822 4,898,554 ---------- ------------- Net decrease in cash (152,686) (539,728) Cash, beginning of period 291,488 596,429 ---------- ------------- Cash, end of period $ 138,802 $ 56,701 ---------- ------------- Supplemental disclosures of cash flow information: Cash paid during the period for: Interest (net of amounts capitalized) $ 1,889,717 $ 2,865,017 Income taxes $ 2,751,811 $ 171,188 Cash received during the period for: Income taxes $ 400,000 The accompanying notes are an integral part of this statement.
5 PLUMA, INC. NOTES TO FINANCIAL STATEMENTS (UNAUDITED) SEPTEMBER 30, 1997 - ----------------------------------------------------------------------------- 1. ACCOUNTING POLICIES The accompanying unaudited financial statements of Pluma, Inc. (the "Company") have been prepared in accordance with generally accepted accounting principles for interim periods. In the opinion of management, these financial statements include all adjustments, including all normal recurring accruals, necessary for a fair presentation of the financial position at September 30, 1997 and December 31, 1996, the results of operations for the three months and nine months ended September 30, 1997 and 1996 and cash flows for the nine months ended September 30, 1997 and 1996. The operating results for the three months and nine months ended September 30, 1997 are not necessarily indicative of the results to be expected for the full year ending December 31, 1997. 2. INVENTORIES Inventories consist of the following: (UNAUDITED) SEPTEMBER 30, DECEMBER 31, 1997 1996 At FIFO cost: Raw materials $ 1,490,557 $ 1,279,512 Work-in-progress 4,643,401 3,297,522 Finished goods 29,061,938 30,037,951 Production supplies 982,097 608,824 -------------- --------------- 36,177,993 35,223,809 Excess of FIFO over LIFO cost (832,109) (83,930) -------------- --------------- 35,345,884 35,139,879 Excess of cost over market (335,018) (1,113,984) --------------- --------------- $ 35,010,866 $ 34,025,895 ============== =============== 3. CAPITAL STOCK On January 28, 1997, the Board of Directors declared a 0.736-for-one reverse common stock split for shareholders of record on February 3, 1997. All references in the accompanying financial statements to the number of common shares and per share amounts reflect the reverse stock split. In March 1997, the Company completed its initial public offering of 2,500,000 shares of Common Stock at $12.00 per share. The $26,400,000 net proceeds were used to reduce debt. 6 In April 1997, the Underwriters' over-allotment option for 293,300 shares of Common Stock at $12.00 per share was exercised. The $3,300,000 net proceeds were used to reduce debt. 4. STOCK OPTIONS In October 1995, the Company adopted the 1995 Stock Option Plan in which 515,200 shares of the Company's Common Stock may be issued. The exercise price of the options may not be less than the fair value of the Common Stock on the date of grant. The options granted become exercisable at such time or times as shall be determined by the Compensation Committee of the Board of Directors (the "Committee"). The Committee may at any time accelerate the exercisability of all or any portion of any stock option. These options expire, if not exercised, ten years from the date of grant. Participants in the Plan may be independent contractors or employees of independent contractors, full or part-time officers and other employees of the Company, or independent directors of the Company. In October 1995 and April 1996, the Company granted 379,776 and 32,384 options, respectively, to purchase Common Stock at an exercise price of $13.077 per share of which 117,171 options are exercisable as of September 30, 1997 and December 31, 1996. 2,355 and 29,440 options were forfeited as of September 30, 1997 and December 31, 1995. The remaining 263,194 options become exercisable in 20% increments on the anniversary dates of the grants as follows: YEAR SHARES 1997 64,179 1998 64,179 1999 64,179 2000 64,180 2001 6,477 ---------- 263,194 ---------- The Company applies APB Opinion No. 25 and related interpretations in accounting for the 1995 Stock Option Plan. Accordingly, no compensation cost has been recognized since the exercise price approximates the fair value of the stock price at the grant dates. Had compensation cost been determined based on the fair value at the grant date consistent with the method of Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation" the Company's net income and earnings per share would have been effected for the three months and nine months ended September 30, 1997 and 1996 as indicated below:
Three Months Nine Months Ended September 30, Ended September 30, 1997 1996 1997 1996 Net Income: As reported $1,768,378 $ 2,735,460 $ 4,063,440 $ 3,454,321 Pro forma $1,768,378 $ 2,735,460 $ 4,063,440 $ 3,315,819 Earnings per Share: As reported $ .22 $ .51 $ .55 $ .65 Pro forma $ .22 $ .51 $ .55 $ .62
7 5. EARNINGS PER SHARE In February 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 128, "Earnings per Share" ("SFAS 128") which changes the method of computing and presenting earnings per share. SFAS 128 requires the presentation of basic earnings per share and diluted earnings per share ("EPS") on the face of the income statement for all entities with complex capital structures and requires a reconciliation of the numerator and denominator of the basic EPS computation to the numerator and denominator of the diluted EPS computation. Basic earnings per share is computed by dividing the net income available to common shareholders by the weighted average shares of outstanding common stock. The calculation of diluted earnings per share is similar to basic earnings per share except that the denominator includes dilutive common stock equivalents such as stock options and warrants. SFAS 128 is effective for financial statements for periods ending after December 15, 1997 and early adoption is not permitted. The pro forma basic earnings per share and diluted earnings per share calculated in accordance with SFAS 128 for the three months and nine months ended September 30, are as follows:
(Unaudited) (Unaudited) Three Months Nine months Ended September 30, Ended September 30, 1997 1996 1997 1996 Pro forma basic earnings per share $ .22 $ .51 $ .55 $ .65 Pro forma diluted earnings per share $ .22 $ .51 $ .55 $ .65
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations GENERAL The following discussion and analysis should be read in conjunction with the financial statements and related notes of this Quarterly Report on Form 10-Q and should be read in conjunction with the Company's 1996 Annual Report. RESULT OF OPERATIONS The following table presents the major components of the Company's Statement of Operations as a percentage of net sales: (Unaudited) (Unaudited) Three Months Nine months Ended September 30, Ended September 30, 1997 1996 1997 1996 Net sales 100.0% 100.0% 100.0% 100.0% Cost of goods sold 87.4 80.9 85.2 84.7 Gross profit 12.6 19.1 14.8 15.3 Selling, general and administrative expenses 4.5 5.9 7.0 7.0 Income from operations 8.1 13.2 7.8 8.3 Other expenses, net .9 2.3 1.3 2.6 Income before income taxes 7.2 10.9 6.5 5.7 Income taxes 2.7 4.0 2.4 2.1 Net income 4.5 6.9 4.1 3.6 8 THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 1997 ("1997"), COMPARED TO THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 1996 ("1996") NET SALES Net sales for the nine months ended September 30, 1997 were $99.5 million, an increase of $3.9 million, or 4.1% over net sales of $95.5 million for the first nine months of 1996. This increase in net sales was principally attributable to increased sales of fleece and an increase in the combined average sales price per dozen. Sales of fleece increased by 4.7% to $60.0 million in 1997 from $57.3 million in 1996. The combined average sales price per dozen increased by 1.6%. Net sales for the third quarter of 1997 were $39.0 million, a decrease of 1.9% from net sales of $39.7 million in the comparable period of the prior year. This decrease is primarily the result of lower unit volume. GROSS MARGINS Gross margins declined to 12.6% and 14.8% for the third quarter and first nine months of 1997, respectively, from 19.1% and 15.3% in the comparable periods of 1996. These declines in gross margin were the result of lower operating efficiencies. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES ("SG&A") For the first nine months, SG&A expenses increased 5.5% to $7.0 million in 1997 from $6.7 million in 1996. SG&A as a percent of sales for 1997 was 7.0% compared to 6.9% in 1996. This increase in SG&A expense is primarily attributable to travel and training expenses related to the implementation of a new management information system and expenses associated with the opening of new outlet stores. These expense increases were partially offset by a decline in compensation expense primarily related to lower bonus accruals. OTHER EXPENSES, NET Other expenses, net, decreased 60.3% to $0.4 million in the third quarter of 1997 and 48.1% to $1.3 million in the first nine months of 1997. This decrease is due primarily to a decrease in interest expense. Net proceeds from the March 1997 initial public offering and from the April 1997 overallotment exercise were used to reduce debt. INCOME TAXES The effective tax rate was 36.8% in 1997 and 1996. LIQUIDITY AND CAPITAL RESOURCES PRINCIPAL SOURCES OF LIQUIDITY Principal sources of liquidity have been net proceeds from the Company's initial public offering and bank financing. In March 1997, the Company completed its initial public offering of 2,500,000 shares of common stock at $12.00 per share. Upon the exercise of an overallotment option in April 1997, the Company issued an additional 293,300 shares at $12.00 per share. The $29.6 million in net proceeds from the issuance of Common Stock was used to reduce debt. The Company maintains a revolving credit facility which permits borrowing of up to $55.0 million. As of September 30, 1997, $33.3 million was outstanding under the facility, leaving $21.7 million in availability. Management believes that the funding available to the Company is sufficient to meet its anticipated capital expenditure, working capital, and other financial needs. CASH FLOWS FROM OPERATING ACTIVITIES For the nine months ended September 30, 1997 and 1996, net cash used in operating activities totaled 9 $9.7 million and $3.5 million, respectively. Accounts receivable, net increased $18.6 million from December 31, 1996 to September 30, 1997 due to increased sales volume and the seasonality of activewear shipments. Inventories increased $1.0 million from December 31, 1996 to September 30, 1997. CASH FLOWS FROM INVESTING ACTIVITIES Capital expenditures were $8.8 million for the nine months ended September 30, 1997. These capital expenditures were primarily to enhance manufacturing and management information systems capabilities. CASH FLOWS FROM FINANCING ACTIVITIES For the nine months ended September 30, 1997, the Company had net debt repayments of $11.1 million as $29.6 million net proceeds from the issuance of Common Stock was used to reduce debt. 10 PART II - OTHER INFORMATION ITEM 2. CHANGES IN SECURITIES On January 28, 1997, the Board of Directors declared a 0.736-for-one reverse Common Stock split for shareholders of record on February 3, 1997. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K a. Exhibits Exhibit Number Filed Herewith (*) 11.1 Computation of Earnings per Share * 27 Financial Data Schedule b. Reports on Form 8-K None 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. Pluma, Inc. ----------------------------------- R. Duke Ferrell, Jr. President, Chief Executive Officer and Director ----------------------------------- Forrest H. Truitt II Executive Vice President, Treasurer and Chief Financial Officer 11 EX-11 2 EXHIBIT 11.1 EXHIBIT 11.1 PLUMA, INC. COMPUTATION OF EARNINGS PER SHARE - -------------------------------------------------------------------------------
(UNAUDITED) (UNAUDITED) THREE MONTHS NINE MONTHS ENDED SEPTEMBER 30, ENDED SEPTEMBER 30, 1997 1996 1997 1996 INCOME AVAILABLE TO COMMON SHAREHOLDERS: Net income available to common shareholders $ 1,768,378 $ 2,735,460 $ 4,063,440 $ 3,454,321 ============ ============ ============ =========== WEIGHTED AVERAGE COMMON SHARES OUTSTANDING: Common shares outstanding 8,109,152 5,315,852 7,366,625 5,315,852 Assumed exercise of stock options --------- --------- --------- --------- Total 8,109,152 5,315,852 7,366,625 5,315,852 ========== ========== ========== ========= EARNINGS PER COMMON SHARE AND COMMON EQUIVALENT - PRIMARY AND FULLY DILUTED $ .22 $ .51 $ .55 $ .65 ====== ====== ====== =====
12 EX-27 3 EXHIBIT 27 FINANCIAL DATA SCHEDULE
5 This schedule contains summary Financial Information extracted from the balance sheet and statements of operations for the nine months ended September 30, 1997 and is qualified in its entirety by reference to such financial statements. 9-MOS DEC-31-1997 SEP-30-1997 138,802 0 42,168,612 1,007,200 35,010,866 78,220,495 55,920,281 20,485,339 114,453,600 11,802,757 33,303,467 0 0 7,222,550 58,465,908 114,453,600 99,477,525 99,477,525 84,714,875 84,714,875 0 190,120 1,697,223 6,429,494 2,366,054 4,063,440 0 0 0 4,063,440 0.55 0.55
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