Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: FRIDAY, March 20, 1992 TAG: 9203200149
SECTION: BUSINESS PAGE: B4 EDITION: METRO
SOURCE: GEORGE KEGLEY BUSINESS EDITOR
DATELINE: MARTINSVILLE LENGTH: Medium
Last year, the company froze hourly pay, cut executive bonuses, eliminated four executive positions and is in "a very painful but necessary process" of reducing worker incentive rates, according to Tultex President Charles Davies.
Last year was the first time in at least 15 years there was no hourly pay raise, he said.
Employees and stockholders have suffered from the recession and decreased customer demand for sweat suits and other apparel, said Tultex Chairman John Franck. Earnings fell 58 percent and sales were down 11 percent last year.
But for 1992 Franck predicted an 11 percent growth in sales, significant improvement in earnings and increased employment. Franck said he expects combined sales of Tultex and its Logo 7 screenprinter subsidiary to reach $450 million, up 11 percent from $406 million last year.
Tultex, the nation's second largest producer of sweat suits after Sara Lee Corp., will expand its fleecewear production in Mexico and Jamaica, Franck said. These operations have lower-paid workers but they cannot respond as quickly as domestic plants to market needs, he said.
About 25 percent of the nation's fleecewear products come from Asian countries, and most Tultex employees "understand the threat," Franck said.
Production shifts will lower the average hourly pay for half of the company's service operations, Davies said, but they will increase the chance to work full schedules and keep jobs in this country. Tultex pay is "much higher" than the U.S industry average, he said.
A stockholder complained that the company's 1991 dividend cut from 9 cents to 5 cents per common share "upset me tremendously" when Tultex executives are receiving "exorbitant salaries."
The man, who did not give his name, asked when the full dividend would be restored. He said he has a strong feeling that executives "don't put in what they should."
Franck said he saw good potential to increase the dividend but declined to predict when that may occur. "We need to get things in line this year if the company is to grow in the future," he added.
Company executives are paid at a competitive rate tied to performance, Franck said. No bonuses were paid last year and there is very little chance they will be paid in 1992, he added.
The company proxy reports show Franck and Davies each received $240,000 last year, down from the chairman's salary of $453,522 and the president's $342,833 in 1990.
Last year's earnings decline brought a return on equity - a measure of earnings against stockholder investment - of 6.7 percent, less than half the company's goal of 15 percent.
Billings and bookings of future orders are more than double the level a year ago and the order backlog is up 47 percent, Davies said. Retailers are very bullish about sales of fleece and T-shirts, inventories are down and running schedules are full, he said.
T-shirt sales in the first full year of production reached $10 million, and Davies predicted that business will triple in 1992.
Tultex lost fleecewear accounts of Sam's Wholesale Club and the Hills and Ames discount chains last year, he said, but the company is the largest fleecewear supplier to Kmart and it sells to Sears, Roebuck & Co. and Wal-Mart. Under a new partnership, Levi Strauss is expected to become one of Tultex's top 10 customers this year and it could be the largest by 1995, he said.
Tultex has taken aggressive steps to move from an excessive manufacturing mindset to become a market-driven company, Franck said.
The company plans a major effort to build consumer recognition of the Tultex brand name, which appears on 35 million garments a year. The name is "not as strong as some of our competition."
Starting this summer, Tultex products will be advertised on network television programs such as "Donahue,""Wheel of Fortune,""Jeopardy" and "Oprah Winfrey," and on several cable channels.
To fill consumers' desires for garments with sports and college logos, Tultex last year bought Logo 7, an Indianapolis screenprinter that is the nation's second-largest licenser of professional sports and college trademarks. Franck said its sales of products licensed by Major League Baseball and the National Football League increased 27 percent in January and February.
The executives predicted new company acquisitions in the future. "We can't go forward being nothing but a sweat-suit producer," Franck said.
by CNB