SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
Commission File # 1-3185
UNITED MERCHANTS AND MANUFACTURERS, INC.
(Exact name of registrant as specified in its charter)
Delaware 13-1426280
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1650 Palisade Avenue, Teaneck, N.J. 07666
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (201) 837-1700
Indicate by check mark whether the registrant (1) has filed all documents
and 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 [ ]
APPLICABLE ONLY TO REGISTRANTS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Indicate by check mark whether registrant has filed all documents and
reports required to be filed by Section 12, 13, or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a
plan confirmed by a court. Yes [X] No [ ]
As of May 15, 1996, there were 17,845,000 shares of Common Stock, Par
Value $1 per share, outstanding.
1
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UNITED MERCHANTS AND MANUFACTURERS, INC.
AND SUBSIDIARIES
FORM 10-Q
- I N D E X -
Page
Number
Part I Financial Information
Consolidated Statement of Operations.............................. 3
Management's Discussion and Analysis of Financial
Condition and Results of Operations.............................. 4
Consolidated Balance Sheet........................................ 7
Consolidated Statement of Cash Flows.............................. 8
Notes to Consolidated Financial Statements........................ 9
Part II Other Information
Items............................................................. 15
Signatures........................................................ 15
2
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PART I - FINANCIAL INFORMATION
UNITED MERCHANTS AND MANUFACTURERS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(000 omitted)
-----------------------------------------
Three Months Ended Nine Months Ended
March 31 March 31
------------------- -------------------
1996 1995 1996 1995
--------- --------- --------- ---------
Net sales........................ $12,280 $11,197 $37,607 $48,291
Cost of sales.................... (6,627) (6,499) (19,781) (28,217)
Selling, general and
administrative expenses......... (6,290) (6,294) (18,218) (24,496)
Amortization of goodwill......... (180) (180) (540) (540)
Loss on termination of certain
operations (Note B)............. (13) (513)
--------- --------- --------- ---------
Operating Loss ($817) ($1,789) ($932) ($5,475)
Interest expense................. (1,372) (2,731) (4,882) (8,420)
Gain from reduction of liability
for postretirement benefits other
than pensions................... 3,995 14,726
Gain on sale of assets not
used in operations.............. (300) 5,121
Loss on sale of operation -
(Note B)........................ (835)
Other income .................... 304 22 436 318
Minority interest in net losses
of subsidiary................... 9 155 (238) 152
Reorganization expenses.......... (25) (25)
Provision for income taxes....... (25) (25) (75) (75)
--------- --------- --------- ---------
Earnings (Loss) from
Continuing Operations $1,769 ($4,368) $14,131 ($14,335)
Discontinued operations (Notes A and B):
Net loss prior to sale or closing (532)
Loss on sale or closing......... (7,900)
--------- --------- --------- ---------
Net Earnings (Loss) $1,769 ($4,368) $14,131 ($22,767)
Dividends applicable to preferred
stock (Note E).................. 1,125 1,125 3,375 3,375
--------- --------- --------- ---------
Net Earnings (Loss) Applicable
to Common Shares $644 ($5,493) $10,756 ($26,142)
========= ========= ========= =========
Average common shares outstanding 17,845 17,845 17,845 17,845
Earnings (Loss) per common share:
Continuing operations........... $0.04 ($0.31) $0.60 ($0.99)
Discontinued operations......... 0.00 0.00 0.00 (0.47)
--------- --------- --------- ---------
Net Earnings (Loss)
per Common Share $0.04 ($0.31) $0.60 ($1.46)
========= ========= ========= =========
See Notes to Consolidated Financial Statements.
3
UNITED MERCHANTS AND MANUFACTURERS, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Consolidated net sales of United Merchants and Manufacturers, Inc. ("UM&M"
or the "Company") increased by 10% during the third quarter of fiscal 1996
which ended March 31, 1996, to $12.3 million from $11.2 million during
last year's same quarter. During the quarter ended March 31, 1996, the
Company's remaining operation, its 79%-owned costume-jewelry subsidiary,
Victoria Creations, Inc. ("Victoria") , reported a 10% increase in net
sales as compared to the same period last year. The increase for the
quarter is attributable to new program launches, strong international
sales and recovering retail sales in the domestic markets. Sales of
out-of-season merchandise (which is sold at lower than Victoria's normal
margin) declined from those of the prior year's comparable period as less
inventory was available for such sales.
For the quarter ended March 31, 1996, the Company reported a consolidated
operating loss of $817,000 versus an operating loss of $1.8 million in
last year's quarter. This improvement was the result of reduced corporate
overhead expenses, together with increased operating income of Victoria.
Victoria reported operating income of $524,000 during this year's quarter
as compared to an operating loss of $18,000 for the same period last year.
Victoria's increased operating results were primarily the result of the
increased sales referred to above combined with lesser increases in both
cost of goods sold and selling, administrative and general expenses.
Victoria's gross profit, as a percentage of net sales, for the current
quarter increased 3% percentage points from that of the three months ended
March 31, 1995. The operation's selling, general and administrative
expenses increased 6% in the current year's quarter from those of last
year's quarter primarily as the result of sales volume related expenses.
As a percentage of net sales, such expenses declined more than one
percentage point from those of the prior comparable period.
Consolidated interest expense decreased 50% for the three months ended
March 31, 1996 compared to such expense in the third quarter of last
fiscal year due to the reduced interest rate resulting from the
renegotiation of borrowing arrangements in July 1995 and to lower average
borrowings. See Note G of Notes to Consolidated Financial Statements.
Consolidated earnings from continuing operations of the Company were $1.8
million for the three months ended March 31, 1996 compared with a loss of
$4.4 million for the same quarter last fiscal year. The earnings from
continuing operations for the current quarter include a gain from
reduction of liability for postretirement benefits other than pension of
$4.0 million and a loss from sale of assets not used in the operations of
$300,000 and reflects the reduced interest expense mentioned above.
4
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Consolidated net sales of the Company for the nine months ended March 31,
1996 decreased 22% from the net sales of $48.3 million reported for the
prior year's nine months. The decrease is primarily the result of the
sale by the Company of its retail store outlet operations effective
December 31, 1994. Excluding the sales of this operation from the fiscal
1995 nine months, net sales would show a decrease of 2%. For the nine
months ended March 31, 1996, Victoria's net sales decreased 3% from the
net sales of $38.7 million reported in the prior year's nine months. The
decrease in Victoria's net sales for the nine months ended March 31, 1996
is attributed to limitations on borrowings of cash from Victoria's senior
secured lender during the five to six-month period prior to August 1995.
The limitations on borrowing constrained Victoria's ability to purchase
raw materials needed to accept orders for finished goods for shipment
during the first fiscal quarter of the current year. The limitations were
lessened at the end of July 1995 when both the Company and Victoria each
renegotiated its long-term debt with its lender and Victoria was able to
recover somewhat during the balance of the Fall season. However, as the
planning for the Spring season began, the Company's senior secured lender
refused to make funds available for the seasonal inventory build up and
also refused to allow the Company to arrange for an alternative funding
source. Without this additional funding, the Company believes its ability
to service its customers' requirements would have been constrained which
could have irreparably harmed its ongoing business relations with these
customers; therefore, the Company and Victoria each filed a petition for
reorganization under Chapter 11 of the Bankruptcy Code (see below and Note
B of Notes to Consolidated Financial Statements).
For the nine months ended March 31, 1996, the Company reported a
consolidated operating loss of $932,000 versus an operating loss of $5.5
million in last year's nine months. The improvement was the result of
reduced corporate overhead expenses and the sale of the retail outlet
store operation, which reported an operating loss of $1.2 million during
last year's nine months, together with increased operating income of
Victoria. Victoria reported operating income of $2.9 million during this
year's nine months as compared to operating income of $1.9 million during
the same period last year. Victoria's increased operating results were
primarily the result of increased gross margin and reduced selling,
general and administrative expenses. Victoria's gross profit, as a
percentage of net sales, for the current nine months increased 3%
percentage points from that of the nine months ended March 31, 1995. The
operation's selling, general and administrative expenses decreased 4% in
the current year's nine months from those of last year's comparable
period, primarily as the result of reductions of sales volume related
expenses and the operation's continued emphasis on expense control.
Consolidated interest expense decreased 42% for the nine months ended
March 31, 1996 compared to such expense in the nine months of last fiscal
year due to the reduced interest rate resulting from the renegotiation of
borrowing arrangements in July 1995 and to lower average borrowings. See
Note G of Notes to Consolidated Financial Statements.
Consolidated earnings from continuing operations of the Company were
approximately $14.1 million for the nine months ended March 31, 1996
compared with a loss of $14.3 million for the same period last fiscal
year. Excluding the operating loss of the retail store outlet operations
5
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from the fiscal 1995 nine months results, the loss would be $13.1 million
for that period. The earnings from continuing operations for the current
nine months include gains from reduction of liability for postretirement
benefits other than pensions of $14.7 million and gain from sale of assets
not used in the operations of $5.1 million and reflects the reduced
interest expense mentioned above. The loss from continuing operations of
the prior year's nine months includes the loss of $835,000 on sale of the
retail store outlet operation mentioned above.
See Note C of Notes to Consolidated Financial Statements regarding the
Company's discontinuance of its Buffalo Mill Operations.
LIQUIDITY AND CAPITAL RESOURCES
During the nine months ended March 31, 1996, the Company sold certain
assets, primarily land and buildings, that were not being used in its
ongoing operations (see Statements of Operations and Cash Flows). The
cash received was used in its operations and to reduce its long-term debt.
During recent years, the Company has incurred significant losses from
operations and as of March 31, 1996 has a stockholders' equity deficit.
As discussed in the Company's 1995 Annual Report on Form 10-K, in June
1994, the Company reduced its senior secured indebtedness by approximately
$63,400,000. While that was a substantial, positive development for the
Company, as of June 30, 1995, the Company's independent auditors' report
stated that the recurring losses from operations, net deficiency in
stockholders' equity and significant debt owed by the Company raise
substantial doubt as to the Company's ability to continue as a going
concern.
Effective February 22, 1996, the Company and its 79%-owned subsidiary,
Victoria Creations, Inc., filed petitions for reorganization relief under
Chapter 11 of the Bankruptcy Code in the United States Court for the
Southern District of New York. The filing became necessary because the
Company's secured lender refused to extend necessary funding for
Victoria's current operations and the Company guarantees Victoria's debt
to the lender. Consequently, the Company and Victoria were unable to meet
their immediate financial commitments. After a thorough review of all
alternatives, the Company was compelled to take this action to preserve
its assets, provide for continuing operation and protect the interests of
its stockholders, creditors, customers, employees and suppliers.
Pursuant to the Bankruptcy Code, the Company is continuing to operate its
businesses as debtor-in-possession while the reorganization case is
pending. The Company is allowed to use, and is using, its cash and other
resources at the operating level in the ordinary course of business.
The Bankruptcy Court has authorized the Company to pay or otherwise honor
certain of its prepetition obligations, including employee wages and
benefit plans.
See Note D of Notes to Consolidated Financial Statements for information
regarding the Company's filing of a notice to terminate its pension plan.
6
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UNITED MERCHANTS AND MANUFACTURERS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(000 omitted)
-------------------
March 31 June 30
1996 1995
ASSETS --------- ---------
Current Assets:
Cash............................................... $812 $965
Receivables, net of allowances of $3,724,000 at
March 31, 1996 and $2,481,000 at June 30, 1995.... 9,590 7,419
Inventories........................................ 17,392 16,430
Prepaid expenses and other current assets.......... 1,469 1,113
Net assets of discontinued operations.............. 0 689
--------- ---------
Total Current Assets $29,263 $26,616
Property, Plant and Equipment....................... $7,237 $12,565
Less accumulated depreciation and amortization..... 5,440 7,924
--------- ---------
$1,797 $4,641
Goodwill............................................ 20,121 20,662
Other Assets and Deferred Charges................... 4,582 6,509
--------- ---------
$55,763 $58,428
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current Liabilities:
Trade payables..................................... $465 $6,418
Accrued expenses and sundry liabilities............ 2,172 12,468
--------- ---------
Total Current Liabilities $2,637 $18,886
Liabilities subject to compromise:
Accounts payable................................... $5,824
Accrued expenses................................... 962
Long-term debt..................................... 55,693
Other long-term liabilities........................ 5,976
---------
Total Liabilities Subject to Compromise $68,455
Long-Term Debt...................................... 27,099 81,071
Other Long-Term Liabilities......................... 2,613 17,881
Minority Interest................................... 1,862 1,624
Stockholders' Equity (Deficit):
Preferred stock, par value $1 per share; 10,000,000
shares authorized; 450,000 shares outstanding..... $450 $450
Common stock, par value $1 per share: 40,000,000
shares authorized; 17,845,000 shares outstanding
(excluding 22,800 shares held in treasury)........ 17,845 17,845
Capital in excess of par value..................... 64,674 64,674
Retained earnings (deficit)........................ (122,285) (136,416)
Unrealized pension liability adjustment............ (3,587) (3,587)
Notes receivable from stock purchase agreement..... (4,000) (4,000)
--------- ---------
Total Stockholders' Equity (Deficit) ($46,903) ($61,034)
--------- ---------
$55,763 $58,428
========= =========
See Notes to Consolidated Financial Statements.
7
UNITED MERCHANTS AND MANUFACTURERS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(000 omitted)
-------------------
Nine Months Ended
March 31
-------------------
1996 1995
--------- ---------
Cash Flows from Operating Activities:
Net earnings (loss)................................ $14,131 ($22,767)
Adjustments to reconcile net earnings (loss) to net
cash used for operating activities:
Depreciation and amortization.................... 916 1,158
Minority interest................................ 238 (152)
Amortization of bond discount.................... 792 774
Gain from reduction of liability for
postretirement benefits other than pensions..... (14,726)
Gain on sale of assets not used in operations.... (5,121)
Loss on shutdown of certain operations........... 7,900
Less cash portion of loss on shutdown .......... (2,704)
Loss on sale of division......................... 835
Decrease (increase) in assets:
Receivables....................................... (1,244) 552
Inventories....................................... (962) 3,025
Prepaid expenses and other current items.......... (356) 213
Other assets and deferred charges................. 1,927 101
Increase (decrease) in liabilities:
Trade payables ................................... (129) 1,364
Accrued expenses and sundry liabilities........... (7,965) (983)
Other long-term liabilities....................... 4,908 (1,066)
--------- ---------
Net Cash Used for Operating Activities ($7,591) ($11,750)
Cash Flows from Investing Activities:
Additions to property, plant and equipment......... ($201) ($267)
Proceeds from sale of assets not used in operations 6,948
less non-cash proceeds - receivables.............. (927)
Dispositions of property, plant and equipment...... 103
Sale or shutdown of divisions:
Proceeds from sale or shutdown of divisions....... 8,941
Net change in assets of discontinued operation
prior to sale or shutdown......................... 689 1,415
--------- ---------
Net Cash Provided by Investing Activities $6,509 $10,192
Cash Flows from Financing Activities:
Increase (Decrease) in long-term debt.............. 929 2,704
--------- ---------
Net Cash Provided by Financing Activities $929 $2,704
--------- ---------
Increase (Decrease) in Cash ($153) $1,146
Cash at beginning of period......................... 965 662
--------- ---------
Cash at end of period $812 $1,808
========= =========
-------------------
Supplemental disclosures of cash flow information:
Interest........................................... $3,140 $8,251
Income Taxes....................................... 75 75
See Notes to Consolidated Financial Statements.
8
UNITED MERCHANTS AND MANUFACTURERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A - BASIS OF PRESENTATION AND LIQUIDITY
Basis of Presentation - The accompanying consolidated financial statements
of United Merchants and Manufacturers, Inc. ("UM&M" or the "Company") and
its subsidiaries have been prepared in accordance with generally accepted
accounting principles for interim financial information and with the
instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly,
they do not include all of the information and footnotes required by
generally accepted accounting principles for complete financial
statements. In the opinion of management, all adjustments (consisting of
normal recurring accruals) considered necessary for a fair presentation
have been included. The results of operations of interim periods are
subject to year-end audit and adjustments and are not necessarily
indicative of the results of operations of the fiscal year. For further
information, refer to the consolidated financial statements and footnotes
included thereto in the Company's Annual Report on Form 10-K for the year
ended June 30, 1995.
The accompanying financial statements have been prepared in conformity
with generally accepted principles applicable to a going concern which
contemplate the realization of assets and the liquidation of liabilities
in the normal course of business. In the event that a plan of
reorganization (see Note B below) is not consummated, certain adjustments
may be required to the stated amounts and classification of assets and
liabilities.
NOTE B - PETITION FOR REORGANIZATION UNDER CHAPTER 11
Effective February 22, 1996, the Company and its 79%-owned subsidiary,
Victoria Creations, Inc., filed petitions for reorganization relief under
Chapter 11 of the Bankruptcy Code in the United States Court for the
Southern District of New York. The filing became necessary because the
Company's secured lender refused to extend necessary funding for
Victoria's current operations and the Company guarantees Victoria's debt
to the lender. Consequently, the Company and Victoria were unable to meet
their immediate financial commitments. After a thorough review of all
alternatives, the Company was compelled to take this action to preserve
its assets, provide for continuing operation and protect the interests of
its stockholders, creditors, customers, employees and suppliers.
Pursuant to the Bankruptcy Code, the Company is continuing to operate its
businesses as debtor-in-possession while the reorganization case is
pending. The Company is allowed to use, and is using, its cash and other
resources at the operating level in the ordinary course of business.
Under Chapter 11, the presentation and collection of certain prepetition
claims against the Company are stayed. These claims are reflected in the
March 31, 1996 balance sheet as "Liabilities Subject to Compromise".
Additional claims (liabilities subject to compromise) may arise subsequent
to the filing date resulting from rejection of executory contracts,
including leases, and may be determined by the court (or agreed to by the
parties in interest) for contingencies and other disputed amounts.
9
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Creditors holding claims secured by the Company's assets are also stayed,
although such claimants may move the court for relief from the stay.
Secured claims are secured by liens on substantially all of the Company's
assets.
Liabilities subject to compromise are stated at the Company's carrying
value and not at the amounts for which the claims may be settled.
The Bankruptcy Court has authorized the Company to pay or otherwise honor
certain of its prepetition obligations, including employee wages and
benefit plans.
The statement of cash flows reflects changes in applicable liabilities
before the reclassification of such amounts to liabilities subject to
compromise.
The Company anticipates that it will not be required to pay postpetition
interest on certain of its prepetition debt obligations and, accordingly,
effective with the filing, discontinued accruing interest on those debt
obligations. Contractual interest not accrued and not reflected in the
statement of operations with respect to those obligations amounted to
$355,000 during the period ended March 31, 1996.
NOTE C - DISPOSITIONS AND TERMINATIONS OF CERTAIN OPERATIONS
In January 1995, the Company sold its retail outlet store operations for
cash and the assumption by the buyer of certain of the operation's
liabilities. As of December 31, 1994, the Company recognized a loss of
$1.3 million for the sale and the loss from operations from December 31,
1994 to date of sale. The statements of operations and cash flows
presented herein include the results of the retail store operations for
the six months ended December 31, 1994. Net sales for the nine months
ended March 31, 1995 include $9.8 million and operating loss includes $1.2
million from these operations.
Discontinued Operations:
In December 1994, the Company announced that it would close its Buffalo
Mill division, which was its Apparel Textiles segment. At that time, the
Company made a provision for losses of $7.9 million for the closing and
ongoing costs of the division.
NOTE D - BENEFITS
Notice of Intent to Terminate Pension Plan:
The discussion in the following paragraph relates to the United Merchants
and Manufacturers, Inc. pension plan. The Retirement Savings Plan of
Victoria Creations, Inc., the Company's 79%-owned subsidiary, is not
affected.
The UM&M pension plan covers approximately 8,800 persons, of whom 12 are
current employees. At present, of the 8,800 who have vested benefits in
the plan, 4,500 are receiving pension payments; the others will receive
10
<PAGE>
payments beginning when they become 65 years of age. As set forth in the
Notes to Consolidated Financial Statements in the Company's Annual Report
on Form 10-K for the year ended June 30, 1995, the Company's obligation
for benefits of $68.8 million, as projected by actuaries, exceeded the
assets held in the pension plan trust fund of $ 62.9 million by $5.9
million or 9%. This underfunding was due in large part to the performance
of the investment markets during the calendar year 1994. As a result of
this underfunded position, the Company was scheduled to make minimum
funding payments of approximately $730,000 each quarter to its pension
plan trust fund beginning October 15, 1995. In addition, the Company was
scheduled to make a payment of approximately $2.9 million to its pension
plan trust fund on March 15, 1996. The Company did not make the
payments. Effective November 28, 1995, the Company determined that it
could not make the contributions necessary to fund its pension plan. At
that time, the Company filed with the Pension Benefit Guarantee
Corporation ("PBGC") a Distress Termination - Notice of Intent to
Terminate form. The proposed date of the termination of the Company's
pension plan was January 31, 1996. If the application for a distress
termination is accepted by the PBGC, the PBGC will take over
administration of the pension plan, the Company will not make further
contributions to the pension plan and the Company's employees will not
earn additional benefits under the pension plan. The Company believes
that the PBGC will ensure that the employees covered by the pension plan
receive the amounts due to them under the pension plan to the extent that
the payments do not exceed the PBGC maximum guaranteed benefit
(approximately $30,000 a year at age 65).
The Internal Revenue Code provides for a tax of 10 percent on the amount
of the accumulated funding deficiency determined as of the end of the plan
year. If such tax is imposed, and the applicable accumulated funding
deficiency is not paid within the taxable period, the Internal Revenue
Service may impose a tax equal to 100 percent of the funding deficiency.
Postretirement Benefits Other Than Pensions:
Effective July 1, 1993, the Company adopted Statement of Financial
Accounting Standards No. 106, "Employers' Accounting for Postretirement
Benefits Other Than Pensions". The statement requires accrual of the cost
of providing postretirement benefits, including medical and life insurance
coverage, during the active service period of the employee rather than the
pay-as-you-go (cash) basis which the company used prior to adoption. The
company elected to immediately recognize the accumulated postretirement
benefit obligation equal to the discounted present value of expected
future benefit payments attributed to employees' service rendered prior to
July 1, 1993. This resulted in a one-time, non-cash charge against
earnings of $15.3 million as of July 1, 1993.
Effective August 31, 1995, the Company discontinued the Company-sponsored
medical plan and, effective March 1, 1996, discontinued the
Company-sponsored life insurance coverage for its employees other than
those of its 79%-owned subsidiary, Victoria Creations, Inc., and its
retirees. The discontinuances resulted in non-cash gains of $10.7 million
and $4.0 million, respectively, from the reduction of the Company's
liability for postretirement benefits other than pension. The
discontinuances will reduce the Company's ongoing cash expenses by more
than $1.3 million a year.
11
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NOTE E - INCOME TAXES
The provisions for income taxes for the three and nine months ended
March 31, 1996 and 1995 varied from the expected relationship to earnings
(loss) before income taxes since the losses before income taxes did not
result in income tax benefits and the Company had net operating loss
carryforwards to offset the earnings. The amounts shown as provisions for
income taxes are for state and local income taxes.
NOTE F - DIVIDENDS APPLICABLE TO PREFERRED STOCK
The Company has not declared nor paid any cash dividends on its 10%
Cumulative Preferred Stock in order to retain its available cash for use
in its operations. For financial statement purposes, cumulative preferred
dividends are deducted from the results of operations in determining
earnings applicable to common shares whether or not such dividends are
declared or paid.
NOTE G - LONG-TERM DEBT
Long-term debt subject to compromise at March 31, 1996 (such debt was not
subject to compromise at June 30, 1995) consists of the following:
(000 omitted)
------------------
March 31 June 30
1996 1995
-------- --------
3 1/2% Senior Subordinated Secured Debentures
due 2009 (net of unamortized discount of
$46,211,000 at March 31, 1996 and
$46,908,000 at June 30, 1995).................... 22,931 22,234
5% Subordinated Notes due 2019:
Issued to former senior lender................... 30,000 30,000
Issued in settlement of lawsuit (net of
unamortized discount of $20,852,000 at
March 31, 1996 and $20,947,000 at
June 30, 1995).................................. 1,148 1,053
Other............................................. 1,614
-------- --------
Total Long-Term Debt subject to compromise $ 55,693 $ 53,287
======== ========
Secured long-term debt consists of the following:
(000 omitted)
------------------
MARCH 31 June 30
1996 1995
-------- --------
Secured term loans - see below.................... $ 11,876 $ 12,000
Revolving loans - see below....................... 15,223 15,784
-------- --------
$ 27,099 $ 27,784
======== ========
The term loans and revolving loan are secured by substantially all of the
Company's assets.
12
<PAGE>
Effective July 31, 1995, the Company and its 79%-owned subsidiary,
Victoria Creations, Inc. ("Victoria"), each renegotiated its borrowing
arrangements with its current lender. Under the terms of the amended
agreements, the Company's borrowings under the revolving and term loans
with the lender were converted to a term loan. This term loan will be
repayable from a portion of the proceeds of sales of the Company's assets,
primarily real property. The term loan matures July 31, 2000 and bears
interest at the rate of 12% a year.
The arrangements for Victoria consist of a term loan ($4,520,000 at March
31, 1996) payable $60,000 a month with the balance due June 15, 2000 and a
revolving loan, based on Victoria's eligible accounts receivable and
inventories, having a term ending June 15, 1998. These loans bear
interest at prime rate plus 3 1/2%, or currently 11 3/4% a year.
NOTE H - SUPPLEMENTAL BALANCE SHEET INFORMATION
Supplemental information regarding certain balance sheet captions is as
follows:
(000 omitted)
------------------
March 31 June 30
1996 1995
-------- --------
Inventories:
Raw materials...................................... $ 5,067 $ 5,120
Work in process.................................... 659 484
Finished goods..................................... 11,666 10,826
-------- --------
$ 17,392 $ 16,430
======== ========
Property, plant and equipment:
Land and buildings................................. $ 1,931 $ 3,596
Machinery, equipment and other..................... 5,306 8,969
-------- --------
$ 7,237 $ 12,565
Less accumulated depreciation and amortization...... 5,440 7,924
-------- --------
Net Property, Plant and Equipment $ 1,797 $ 4,641
======== ========
Other assets and deferred charges:
Interest receivable - sale of stock................. $ 1,982 $ 1,873
Assets held for sale................................ 1,669 3,260
Deferred royalty expenses........................... 272 350
Deposits............................................ 180 291
Other............................................... 479 735
-------- --------
$ 4,582 $ 6,509
======== ========
13
<PAGE>
(000 omitted)
------------------
March 31 June 30
1996 1995
-------- --------
Accrued expenses and sundry liabilities:
Accrued pension liability........................... $ 0 $ 5,116
Accrued workers compensation........................ 0 1,095
Accrued interest.................................... 0 1,210
Accrued compensation expenses....................... 960 1,428
Accrued taxes other than payroll.................... 439 735
Postretirement benefits other than pension.......... 0 1,370
Other............................................... 773 1,514
-------- --------
$ 2,172 $ 12,468
======== ========
Other long-term liabilities:
Postretirement benefits other than pension.......... $ 0 $ 13,355
Deferred shutdown costs............................. 1,519 3,732
Accrued workers compensation........................ 1,094 0
Accrued pension liability........................... 0 794
-------- --------
$ 2,613 $ 17,881
======== ========
NOTE I - LEGAL PROCEEDINGS
The Company is a defendant in various lawsuits. It is not expected that
these suits will result in judgements which in the aggregate would have a
material adverse effect on the Company's financial position.
NOTE J - NEGOTIATIONS REGARDING SALE OF SUBSIDIARY'S ASSETS
Under order of the Bankruptcy Court, the Company's 79%-owned subsidiary
is negotiating to sell most of its assets, subject to certain liabilities,
as a "going concern". At present, two interested parties are reviewing
and examining the subsidiary's assets, liabilities, operations and books
and records. Certain other parties have requested preliminary information
which the subsidiary has supplied.
14
<PAGE>
UNITED MERCHANTS AND MANUFACTURERS, INC.
AND SUBSIDIARIES
PART II - OTHER INFORMATION
Item 2. Changes in Securities
Information required under this item is contained in Part I,
Note G of Notes to Consolidated Financial Statements, which is
incorporated herein by reference.
Item 6. Exhibits and Reports on Form 8-K
(A) Reports on Form 8-K during quarter - None
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.
UNITED MERCHANTS AND MANUFACTURERS, INC.
(Registrant)
Date: May 22, 1996 By /s/ Norman R. Forson
Norman R. Forson
Senior Vice President and
Corporate Comptroller
15
<PAGE>
UNITED MERCHANTS AND MANUFACTURERS, INC. AND SUBSIDIARIES
FORM 10-Q
INDEX TO EXHIBIT
The following exhibit is being filed herewith:
Exhibit No.
(27) Financial Data Schedule as of and for the quarter ended March 31,
1996 is filed herewith.
E-1
<PAGE>
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<ARTICLE> 5
<CIK> 0000101357
<NAME> UNITED MERCHANTS AND MANUFACTURERS, INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-END> MAR-31-1996
<CASH> 812
<SECURITIES> 0
<RECEIVABLES> 13314
<ALLOWANCES> 3724
<INVENTORY> 17392
<CURRENT-ASSETS> 29263
<PP&E> 7237
<DEPRECIATION> 5440
<TOTAL-ASSETS> 55763
<CURRENT-LIABILITIES> 2637
<BONDS> 82792
0
450
<COMMON> 17845
<OTHER-SE> (65198)
<TOTAL-LIABILITY-AND-EQUITY> 55763
<SALES> 37607
<TOTAL-REVENUES> 37607
<CGS> 19781
<TOTAL-COSTS> 19781
<OTHER-EXPENSES> 540
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4882
<INCOME-PRETAX> 14206
<INCOME-TAX> 75
<INCOME-CONTINUING> 14131
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 14131
<EPS-PRIMARY> 0.60
<EPS-DILUTED> 0.60
</TABLE>
