SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q/A
AMENDMENT NO. 1 TO FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended October 2, 1999 or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from__________ to__________
Commission file number 1-2782
SIGNAL APPAREL COMPANY, INC.
(Exact name of registrant as specified in its charter)
Indiana 62-0641635
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
34 Engelhard Avenue, Avenel, New Jersey 07001
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (732) 382-2882
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.
Class Outstanding at November 30, 1999
----- --------------------------------
Common Stock 44,952,783 shares
<PAGE>
This amendment amends Part I of the Quarterly Report on Form 10-Q as follows:
(a) the pro forma financial information presented in Footnote 7 to the financial
statements has been corrected to show pro forma results for both the three month
and nine month periods ended October 3, 1998 and (b) Management's Discussion and
Analysis has been amended by adding additional information concerning a $1.9
million loss on closeout goods related to the Big Ball shutdown to the
discussion of Results of Operations for the nine months ended October 2, 1999.
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
SIGNAL APPAREL COMPANY, INC.
CONSOLIDATED BALANCE SHEETS
(In Thousands)
(Unaudited)
<TABLE>
<CAPTION>
October 2, Dec. 31,
1999 1998
--------- ---------
<S> <C> <C>
Assets
Current Assets:
Cash $ 444 $ 403
Receivables, less allowance for doubtful
accounts of $2,790 in 1999 and $1,916 in 1998, respectively 785 1,415
Note receivable 864 283
Inventories 8,069 12,641
Prepaid expenses and other 1,394 539
--------- ---------
Total current assets: 11,556 15,281
Property, plant and equipment, net 3,175 3,001
Goodwill, less accumulated amortization
of $1,359 in 1999 26,718 0
Debt Issuance Costs, net 5,655 0
Other assets 536 182
--------- ---------
Total assets $ 47,640 $ 18,464
========= =========
Liabilities and Shareholders' Deficit
Current Liabilities:
Accounts payable 5,246 8,133
Accrued liabilities 6,669 9,760
Accrued interest 5,872 3,810
Current portion of long-term debt and capital leases 3,803 6,435
Revolving advance account 30,624 44,049
Term Loan 48,031 0
--------- ---------
Total Current Liabilities: 100,245 72,187
Long-term Liabilities:
Convertible Debentures 3,186 0
Capital Leases 200 0
Notes Payable Principally to Related Parties 24,541 13,968
--------- ---------
Total Long-term Liabilities: 27,927 13,968
Shareholders' Deficit:
Preferred Stock 50,478 52,789
Common Stock 534 326
Additional paid-in capital 189,748 165,242
Accumulated deficit (320,175) (284,931)
--------- ---------
Subtotal (79,415) (66,574)
Less: Cost of Treasury shares (140,220 shares) (1,117) (1,117)
--------- ---------
Total Shareholders' Deficit (80,532) (67,691)
--------- ---------
Total Liabilities and
Shareholders' Deficit $ 47,640 $ 18,464
========= =========
</TABLE>
See accompanying notes to financial statements.
Page 3
<PAGE>
SIGNAL APPAREL COMPANY, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands Except Per Share Data)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
October 2, October 3, October 2, October 3,
1999 1998 1999 1998
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net Sales $ 10,698 $ 15,297 $ 79,319 $ 39,341
Cost of Sales 7,758 14,184 71,232 32,163
-------- -------- -------- --------
Gross Profit 2,940 1,113 8,807 7,178
Royalty Expense 663 1,434 4,056 3,290
Selling, General &
Administrative 6,390 4,728 25,691 13,831
Interest Expense 4,422 3,343 11,410 6,961
Other (Income) net - 0 - (18) - 0 - (555)
-------- -------- -------- --------
Loss Before Income Taxes (8,535) (8,374) (33,070) (16,349)
Income Taxes - 0 - - 0 - - 0 - - 0 -
-------- -------- -------- --------
Net Loss (8,535) (8,374) (33,070) (16,349)
-------- -------- -------- --------
Preferred Stock Dividends 724 - 0 - 2,174 - 0 -
Net Loss Applicable to Common $ (9,259) $ (8,374) $(35,244) $(16,349)
Basic Diluted Net Loss Per Share $ (0.17) $ (0.26) $ (0.72) $ (0.50)
======== ======== ======== ========
Weighted average shares outstanding 53,384 32,662 49,127 32,641
(including shares to be issued)
</TABLE>
See accompanying notes to financial statements.
Page 4
<PAGE>
SIGNAL APPAREL COMPANY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
October 2, October 3,
1999 1998
-------- --------
<S> <C> <C>
Operating Activities:
Net loss $(35,244) $(16,349)
Adjustments to reconcile net loss to net cash
used in operating activities, net of the
effect of acquisitions and sales:
Depreciation and amortization 3,488 2,548
Non-cash interest charges 3,227 0
(Gain) on disposal of equipment (52) (402)
Changes in operating assets
and liabilities:
Receivables 104 (2,299)
Inventories 12,837 (2,213)
Prepaid expenses and other assets (761) (21)
Accounts payable and accrued
liabilities (10,158) 3,340
-------- --------
Net cash used in operating
activities (26,559) (15,354)
-------- --------
Investing Activities:
Purchases of property, plant and
equipment (107) (238)
Proceeds from notes receivable 0 176
Restricted Cash 476 0
Proceeds from the sale of Heritage Division 2,000 0
Proceeds from the sale of Grand Illusion Division 435 0
Proceeds from the sale of property,
plant and equipment 0 877
-------- --------
Net cash provided by
investing activities 2,804 815
-------- --------
Financing Activities:
Decrease in Cash in Bank or Bank Overdraft 0 667
Net increase (decrease) in revolving
advance account (27,257) 1,891
Net increase in term loan borrowings 47,672 0
Net increase in borrowings from
related party 0 8,775
Principal payments on borrowings 3,411 (1,784)
Repurchase of preferred stock (2,398) 4,624
Proceeds from sale of convertible debt 2,350 0
New common stock issued 18 0
Net cash provided by
financing activities 23,796 14,173
-------- --------
Increase in cash 41 (366)
Cash at beginning of period 403 384
-------- --------
Cash at end of period $ 444 $ 18
======== ========
</TABLE>
See accompanying notes to financial statements
Page 5
<PAGE>
Part I Item 1. (continued)
SIGNAL APPAREL COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Un-audited)
1. The accompanying consolidated condensed financial statements have been
prepared on a basis consistent with that of the consolidated financial
statements for the year ended December 31, 1998. The accompanying financial
statements include all adjustments (consisting only of normal recurring
accruals) which are, in the opinion of the Company, necessary to present
fairly the financial position of the Company as of October 2, 1999 and its
results of operations and cash flows for the three months ended October 2,
1999. These consolidated condensed financial statements should be read in
conjunction with the Company's audited financial statements and notes
thereto included in the Company's annual report on Form 10-K for the year
ended December 31, 1998.
2. The results of operations for the three months ended October 2, 1999 are
not necessarily indicative of the results to be expected for the full year.
3. Inventories consisted of the following:
October 2 , December 31,
1999 1998
(In thousands)
Raw materials and supplies $ 0 $ 788
Work in process 0 1,377
Finished goods 8,069 10,262
Supplies 0 214
------- -------
$ 8,069 $12,641
======= =======
4. Pursuant to the terms of various license agreements, the Company is
obligated to pay future minimum royalties of approximately $1.6 million in
1999.
5. The computation of basic net loss per share is based on the weighted
average number of common shares outstanding during the period. Diluted
earnings per share would also include common stock equivalents outstanding
(including shares to be issued upon shareholder consent). See Notes 7 and 9
below. Due to the Company's net loss for all periods presented, all common
stock equivalents would be anti-dilutive to diluted earnings per share.
6. On August 10, 1998, the Company's Board of Directors approved a new Credit
Agreement between the Company and WGI, LLC, to be effective as of May 8,
1998 (the "WGI Credit Agreement"), pursuant to which WGI will lend the
Company up to $25,000,000 on a revolving basis for a three-year term ending
May 8, 2001. Additional material terms of the WGI Credit Agreement are as
follows: (i) maximum funding of $25,000,000, available in increments of
$100,000 in excess of the minimum funding of $100,000; (ii) interest on
outstanding balances payable quarterly at a rate of 10% per annum; (iii)
secured by a security interest in all of the Company's assets (except for
the assets of its Heritage division and certain former plant locations
which were being held for sale), subordinate to the security interests of
the Company's senior lender; (iv) funds borrowed may be used for any
purpose approved by the Company's directors and executive officers,
including repayment of any other existing indebtedness of the Company; (v)
WGI, LLC is entitled to have two designees nominated for election to the
Company's Board of Directors during the term of the agreement;
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<PAGE>
and (vi) WGI, LLC will receivewarrants to purchase up to 5,000,000 shares
of the Company's Common Stock at $1.75 per share.
The warrants issued in connection with the WGI Credit Agreement will vest
at the rate of 200,000 warrants for each $1,000,000 increase in the largest
balance owed at any one time over the life of the credit agreement (as of
October 2, 1999, the largest outstanding balance to date has been
$20,510,000, which means that warrants to acquire 4,102,000 shares of
Common Stock have vested as of such date). These warrants were subject to
shareholder approval which was obtained at the Company's annual meeting.
The warrants have registration rights no more favorable than the equivalent
provisions in the currently outstanding warrants issued to principal
shareholders of the Company, except that such rights include three demand
registrations. The warrants also contain anti-dilution provisions which
require that the number of shares subject to such warrants shall be
adjusted in connection with any future issuance of the Company's Common
Stock (or of other securities exercisable for or convertible into Common
Stock) such that the aggregate number of shares issued or issuable subject
to these warrants (assuming eventual vesting as to the full 5,000,000
shares) will always represent ten percent (10%) of the total number of
shares of the Company's Common Stock on a fully diluted basis. The fair
market value using the Black-Scholes option pricing model of the above
mentioned warrants of approximately $4,467,000 has been capitalized and is
included in the accompanying consolidated balance sheet as a debt discount.
These costs are being amortized over the term of the debt agreement with
WGI. As a result of the anti-dilution protection in the warrants and the
completion of the Tahiti acquisition (including the issuance of the
additional 4.3 million common shares) (see Note 7), the Company anticipates
issuing approximately 4.2 million additional warrants to WGI, LLC.
7. On March 22, 1999, the Company completed the acquisition of substantially
all of the assets of Tahiti Apparel, Inc. ("Tahiti"), a New Jersey
corporation engaged in the design and marketing of swimwear, body wear and
active wear for ladies and girls. The financial statements reflect the
ownership of Tahiti as of January 1, 1999. The Company exercised dominion
and control over the operations of Tahiti commencing January 1, 1999.
Pursuant to the terms of an Asset Purchase Agreement dated December 18,
1998 between the Company, Tahiti and the majority stockholders of Tahiti,
as amended by agreement dated March 16, 1999 and as further amended
post-closing by agreement dated April 15, 1999 (as amended, the
"Acquisition Agreement"), the purchase price for the assets and business of
Tahiti is $15,872,500, payable in shares of the Company's Common Stock
having an agreed value (for purposes of such payment only) of $1.18750 per
share. Additionally, the Company assumed, generally, the liabilities of the
business set forth on Tahiti's audited balance sheet as of June 30, 1998
and all liabilities incurred in the ordinary course of business during the
period commencing July 1, 1998 and ending on the Closing Date (including
Tahiti's liabilities under a separate agreement (as described below)
between Tahiti and Ming-Yiu Chan, Tahiti's minority shareholder). This
acquisition gave rise to goodwill of $28.1 million which is being amortized
over a period of 15 years.
The acquisition will result in the issuance of 13,366,316 shares of the
Company's Common Stock to Tahiti in payment of the purchase price under the
Acquisition Agreement. The Acquisition Agreement also provides that
1,000,000 of such shares will be placed in escrow with Tahiti's counsel,
Wachtel & Masyr, LLP (acting as escrow agent under the terms of a separate
escrow agreement) for a period commencing on the Closing Date and ending on
the earlier of the second anniversary of the Closing Date or the completion
of Signal's annual audit for its 1999 fiscal year. This escrow will be used
exclusively to satisfy the obligations of Tahiti and its majority
stockholders to indemnify the Company against certain potential claims as
specified in the Acquisition Agreement. Any shares not used to satisfy such
indemnification obligations will be released to Tahiti at the conclusion of
the escrow period. As discussed below, the Company also issued 1,000,000
additional shares of Common Stock under the terms of the Chan Agreement.
During the course of negotiations leading to the execution of the
Acquisition Agreement, and in order to enable Tahiti to obtain working
capital financing needed to support its ongoing operations, the Company
guaranteed repayment by Tahiti of certain amounts owed by Tahiti under one
of its loans from Bank of New York Financial Corporation ("BNYFC"), which
also is the Company's senior lender.
At a meeting held January 29, 1999, the Company's shareholders approved the
issuance of up to 10,070,000 shares of the Company's Common Stock in
connection with the Acquisition Agreement and the Chan
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<PAGE>
Agreement, which shares were issued in connection with the closing. Under
the rules of the New York Stock Exchange, on which the Company's Common
Stock is traded, issuance of the additional 4,296,316 shares of Common
Stock called for by the March 16 amendment to the Acquisition Agreement
will be subject to approval by the Company's shareholders at the Company's
1999 annual meeting. The Company's principal shareholder, WGI, LLC, has
executed a proxy in favor of Zvi Ben-Haim to vote in favor of the issuance
of such additional 4,296,316 shares of the Company's Common Stock at the
Company's 1999 Annual Meeting.
In connection with the acquisition, Tahiti and Tahiti's majority
stockholders reached an agreement with Tahiti's minority shareholder,
Ming-Yiu Chan (the "Chan Agreement"), pursuant to which Tahiti executed a
promissory note to Chan in the principal amount of $6,770,000 (the "Chan
Note"), bearing interest at the rate of 8% per annum. Under the terms of
the Acquisition Agreement, the Company assumed the Chan Note following
Closing. Effective March 22, 1999, the Company exercised its right to pay
the $3,270,000 portion of the Chan Note through the issuance of 1,000,000
shares of Common Stock of the Company to Chan.
The results of operations of Tahiti are included in the accompanying
consolidated financial statements from the date of acquisition (i.e.
January 1, 1999). The pro forma financial information below is based on the
historical financial statements of Signal Apparel and Tahiti and adjusted
as if the acquisition had occurred on January 1, 1998, with certain
assumptions made that management believes to be reasonable. This
information is for comparative purposes only and does not purport to be
indicative of the results of operations that would have occurred had the
transactions been completed at the beginning of the respective periods or
indicative of the results that may occur in the future.
<TABLE>
<CAPTION>
3 Months Ended 9 Months Ended
October 3, 1998 October 3, 1998
(Un-audited (Un-audited
In Thousands) In Thousands)
------------- -------------
<S> <C> <C>
Operating Revenue $ 25,210 $ 97,180
Income from Operations $ (6,771) $ (9,805)
Net Loss $(10,792) $(18,986)
Basic/diluted net loss per share $ (0.23) $ (0.41)
Weighted average shares outstanding 46,028 46,014
</TABLE>
8. Effective March 22, 1999, the Company completed a new financing arrangement
with its senior lender, GMAC Financial Corporation (successor in interest
to BNY Financial Corporation) (on its own behalf and as agent for other
participating lenders), which provides the Company with funding of up to
$98,000,000 (the "Maximum Facility Amount") under a combined facility that
includes two Term Loans aggregating $50,000,000 (supported in part by
$25,500,000 of collateral pledged by an affiliate of WGI, LLC, the
Company's principal shareholder) and a Revolving Credit Line of up to
$48,000,000 (the "Maximum Revolving Advance Amount"). Subject to the
lenders' approval and to continued compliance with the terms of the
original facility, the Company may elect to increase the Maximum Revolving
Advance Amount from $48,000,000 up to $65,000,000, in increments of not
less than $5,000,000.
The Term Loan portion of the new facility is divided into two segments with
differing payment schedules: (i) $27,500,000 ("Term Loan A") payable, with
respect to principal, in a single installment on March 12, 2004 and (ii)
$22,500,000 ("Term Loan B") payable, with respect to principal, in 47
consecutive monthly installments on the first business day of each month
commencing April 1, 2000, with the first 46 installments to equal
$267,857.14 and the final installment to equal the remaining unpaid balance
of Term Loan B. The Credit Agreement allows the Company to prepay either
term loan, in whole or in part, without premium or penalty. In connection
with the Revolving Credit Line, the Credit Agreement also provides (subject
to certain conditions) that the senior lender will issue Letters of Credit
("L/Cs") on behalf of the Company, subject to a maximum L/C amount of
$40,000,000 and further subject to the requirement that the sum of all
advances under the revolving credit line (including any outstanding L/Cs)
may not exceed the lesser of the Maximum Revolving Advance Amount or an
amount (the "Formula Amount") equal to the sum of: (1) up to 85% of
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<PAGE>
Eligible Receivables, as defined, plus (2) up to 50% of the value of
Eligible Inventory, as defined (excluding L/C inventory and subject to a
cap of $30,000,000 availability), plus (3) up to 60% of the first cost of
Eligible L/C Inventory, as defined, plus (4) 100% of the value of
collateral and letters of credit posted by the Company's principal
shareholders, minus (5) the aggregate undrawn amount of outstanding Letters
of Credit, minus (6) Reserves (as defined). In addition to the secured
revolving advances represented by the Formula Amount, and subject to the
overall limitation of the Maximum Revolving Advance Amount, the agreement
provides the Company with an additional, unsecured Overformula Facility of
$17,000,000 (the outstanding balance of which must be reduced to not more
than $10,000,000 for at least one business day during a five business day
cleanup period each month) through December 31, 2000. In consideration for
the unsecured portion of the credit facility, the Company issued 1,791,667
shares of Signal Apparel Common Stock and warrants to purchase 375,000
shares of Common Stock priced at $1.50 per share. The fair market value of
the above mentioned shares of common stock of approximately $2.1 million
has been capitalized and is included in the accompanying consolidated
balance sheet as debt issuance cost. The fair market value, using the
Black-Scholes option pricing model, of the above mentioned warrants of
approximately $0.2 million has been capitalized and is included in the
accompanying consolidated balance sheet as a debt discount. These costs are
being amortized over the five year term of the debt agreement with GMAC.
9. During the second quarter of 1999, in order to further assist the Company
in meeting its ongoing liquidity needs, WGI, LLC made direct payments of
$2.1 million to a third party licensor on the Company's behalf and, in
connection with the Company's Revolving Credit and Term Loan facility with
GMAC, executed certain guaranties and pledged certain collateral in the
aggregate amount of $21.6 million. In consideration for the aggregate of
$23.7 million in payments and credit enhancements provided by WGI, LLC, the
Company agreed to issue to WGI, LLC 4,217,956 shares of the Company's
common stock. These shares were valued at the then market price of $1.125
per share for a total value of $4,475,200. Under the rules of the New York
Stock Exchange, on which the Company's Common Stock is traded, issuance of
the 4,217,956 shares of Common Stock called for by the Reimbursement
Agreement will be subject to approval by the Company's shareholders at the
Company's 1999 annual meeting. The Company's principal shareholder, WGI,
LLC, intends to vote in favor of the issuance of such 4,217,956 shares of
the Company's Common Stock at the Company's 1999 Annual Meeting.
During the third quarter of 1999, the Company entered into a Reimbursement
Agreement and related Promissory Note (to be effective as of June 30, 1999)
as a mechanism for reimbursing WGI, LLC for payments made on the Company's
behalf outside of the WGI Credit Agreement, as well as for any loss that it
might suffer as a result of a decision by GMAC to proceed against the
guaranties and/or collateral posted with respect to the Company's senior
loan obligations. The Reimbursement Agreement will remain outstanding for
as long as WGI, LLC is obligated under any guaranties, or has any
collateral posted, with respect to the Company's obligations under
agreements with its senior lender or until all obligations under the
Reimbursement Agreement are repaid, whichever is later. Indebtedness under
the Reimbursement Agreement and Promissory Note will be unsecured, will be
subordinate to the Company's obligations to its senior lender and will bear
interest at the rate of eight percent (8.0%) per annum, payable in annual
installments either in cash or (at the Company's option, subject to
shareholder approval at the 1999 Annual Meeting) with shares Common Stock
valued at the then-current market price. The Company's initial principal
indebtedness of $2.1 million under the note will automatically increase
from time to time (up to a maximum of $53.226 million) in an amount equal
to any payments made by WGI, LLC pursuant to any of the GMAC guaranties,
plus the value of any WGI collateral which is offset by GMAC against the
Company's obligations. The principal amount of such indebtedness will be
payable at any time upon demand of WGI, LLC.
10. On March 3, 1999, the Company completed the private placement of $5 million
of 5% Convertible Debentures due March 3, 2002 with two institutional
investors. The Company utilized the net proceeds from issuance of these
Debentures to redeem all of the remaining outstanding shares of the
Company's 5% Series G1 Convertible Preferred Stock (following the
conversion of $347,685.42 stated value (including accrued dividends) of
such stock into 331,140 shares of the Company's Common Stock effective
February 26, 1999, by two other institutional investors). This transaction
effectively replaced a security convertible into the
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Company's Common Stock at a floating rate (the 5% Series G1 Preferred
Stock) with a security (the Debentures) convertible into Common Stock at a
fixed conversion price of $2.00 per share. The transaction also reflects
the Company's decision to forego the private placement of an additional $5
million of 5% Series G2 Preferred Stock under the original purchase
agreement with the Series G1 Preferred investors. In connection with the
sale of the $5 million of Debentures, the Company issued 2,500,000 warrants
to purchase the Company's Common Stock at $1.00 per share with a term of
five years. The fair market value, using the Black-Scholes option pricing
model, of the above mentioned warrants of approximately $2.25 million has
been capitalized and included in the consolidated balance sheet as a debt
discount. These costs are being amortized over the term of the Debentures.
Effective September 14, 1999, in connection with the Company's late payment
of interest that was due July 1, 1999 and the holders' waiver of the
associated Event of Default, the Company agreed with the two holders of the
Debentures that (A) the Debentures would be amended to eliminate an
election that the Company previously had to make interest payments in
either stock or cash and (B) the conversion price for the debentures would
remain fixed at $2.00 per share of Common Stock until December 31, 1999, at
which time the holders may adjust the conversion price to $1.00 per share
unless Signal procures the posting of not less than $10 million of new
collateral in support of additional funding under its GMAC loan on or
before such date (in which case the Company may elect to adjust the
conversion price to $1.25 per share of Common Stock).
11. In January 1999, the Company completed the sale of its Heritage division, a
woman's fashion knit business, to Heritage Sportswear, LLC, a new company
formed by certain former members of management of the Heritage division.
Additional information regarding the terms of this sale is available in the
Company's Form 10-K Annual Report for the year ended December 31, 1998.
12. In the first quarter of 1999, Signal closed its offices and warehouses in
Chattanooga, Tennessee and its production facilities in Tazewell, Tennessee
and shut down substantially all of its operations located there. Signal
relocated its sales and merchandising offices to New York, New York and
relocated the corporate offices and all accounting and certain related
administrative functions to offices in Avenel, New Jersey.
13. In the second quarter of 1999, Signal closed its warehouse and printing
facility in Houston, Texas and shut down substantially all of its
operations located there (except for certain artist functions). The Houston
facility was the location for the design, manufacture, and sale of the
Company's Big Ball Sports line of products. Signal relocated the sales and
merchandising functions to New York, New York and has outsourced all of the
manufacturing functions for the Big Ball Sports line to third parties. The
Company's negative Gross Profit for the second quarter of 1999 includes
$1.9 million of negative gross margin on closeout goods and $0.5 million of
negative gross margin resulting from customer chargebacks related to the
Big Ball shutdown.
14. In July, 1999, the Company completed the sale of its GIDI Holdings, Inc.
subsidiary (also known as Grand Illusion) to John Prutch, the previous
president of the Company. Under the terms of the sale dated July 31, 1999,
the Company sold all of the issued and outstanding common stock of GIDI
Holdings to John Prutch in consideration of the assumption by the buyer of
$0.9 million of short term liabilities of GIDI Holdings (including the
release of any guaranties of the Company of such obligations). This
resulted in the Company recognizing a gain on sale of $0.4 million. The
Company also retained 35 shares of Series A Preferred Stock in GIDI
Holdings. The Preferred Stock has the following attributes: (a) Par value
of $10,000 per share, (b) senior to all other classes of capital stock in
GIDI Holdings, (c) cumulative 6% cash dividends accrue and are payable
semi-annually on June 30 and December 31 each year, (d) if GIDI Holdings or
its assets are sold within 18 months after the last share of Preferred
Stock has been redeemed, the Preferred Holders are entitled to receive 35%
of all proceeds of sale in excess of $1.0 million, (e) veto rights on any
organic change in GIDI Holdings, (f) convertible (in the aggregate) into
35% of the common stock of GIDI Holdings, and (g) starting December 31,
1999, mandatory redemption of 6 shares each 6 months.
15. In the first quarter of 1999, WGI waived its right to receive $1.5 million
in preferred dividends which would have accrued in relation to the Series H
Preferred Stock during the first quarter of 1999. WGI has not waived any
other right to receive preferred dividends which accrued after the end of
the first quarter of 1999.
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Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS:
Three Months Ended October 2, 1999
Net sales of $10.7 million for the quarter ended October 2, 1999 represents a
decrease of $4.6 million (or 30%) from $15.3 million in net sales for the
corresponding period of 1998. This decrease is mainly attributed to the fact
that third quarter 1999 sales do not reflect any sales from the Heritage
division (sold at 1/1/99) which had provided $3.7 million in sales in the
quarter ended October 3, 1998. In addition, the sale of the Grand Illusion
division resulted in the third quarter 1999 reflecting only $0.3 million in
sales from Grand Illusion compared to $1.1 million in sales from such division
in the comparable 1998 quarter. Moreover, the closing of the Big Ball division
resulted in the third quarter of 1999 reflecting only $ 0.1 million in residual
sales from Big Ball compared to $1.3 million in sales from such division in the
comparable 1998 quarter. Conversely, the 1999 third quarter does reflect $ 5.6
million of sales from the Tahiti and Umbro divisions which did not exist in the
third quarter of 1998.
Total Gross Margin before royalties increased $1.8 million in the third quarter
of 1999 compared to the corresponding period in 1998. Gross Margin percentage
was 27.5% for the third quarter of 1999 compared to 7.3% for the quarter ended
October 3, 1998. The $1.8 million increase in total gross margin is attributable
primarily to an improvement of 20% in the Company's margins on the $10.7 million
of sales in the third quarter of 1999.
Royalty expense related to licensed product sales was 6.2% of sales for the
quarter ended October 2, 1999, compared to 9.4% for the corresponding period of
1998. This decrease resulted primarily from an increase by the Company in sales
of proprietary products.
Selling, general and administrative (SG&A) expenses as a percentage of total
sales were 60% of sales for the quarter ended October 2, 1999 compared to 31% of
sales for the corresponding period of 1998. The total amount of SG&A expenses
increased a total of $1.7 million from $4.7 million in the quarter ended October
3, 1998 to $6.4 million for the comparable quarter of 1999. The change in the
total amount of SG&A between 1998 and 1999 is primarily related to the
acquisition of Tahiti and the different cost structure associated with its
business.
During the third quarter of 1999, the Company continued to implement the revised
business strategy initiated in the last quarter of 1998, which has resulted in a
change from the Company being primarily a manufacturer of products to primarily
a sales, marketing, merchandising and distribution company for activewear and
other clothing. As a result, the Company closed its last operating facility for
the Big Ball division in Houston, Texas during the second quarter.
Depreciation and amortization increased from $0.4 million in the quarter ended
October 3, 1998 to $0.5 million in the comparable 1999 period. However, the
amortization of Goodwill was $0.45 million and depreciation was $0.05 million in
the quarter ended October 2, 1999, whereas the $0.4 million recorded in 1998
consisted entirely of depreciation expense. The reduction of depreciation
expense for the 1999 quarter compared to 1998 resulted primarily from the sale
by the Company of a substantial portion of its fixed assets in connection with
the various plant closings that have occurred.
Interest expense for the quarter ended October 2, 1999 was $4.4 million compared
to $3.3 million in the comparable quarter of 1998. In the third quarter of 1999,
$2.0 million of the $4.4 million of interest expense is non-cash interest
amortization related to the reduction of debt discounts for the WGI, LLC
warrants and the warrants and common stock issued to GMAC (See Notes 6 and 8).
Nine Months Ended October 2, 1999
Net sales of $79.3 million for the nine months ended October 2, 1999 represents
an increase of $40.0 million (or 102%) from $39.3 million in net sales for the
corresponding period of 1998. This increase is mainly attributed to
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$58.3 million in combined new sales from the newly acquired Tahiti division and
the Umbro division. Conversely, the first nine months of 1999 sales do not
reflect any sales from the Heritage division (sold at 1/1/99) which had provided
$9.4 million in sales in the nine months ended October 3, 1998. In addition, the
sale of the Grand Illusion division resulted in the first nine months of 1999
reflecting only $2.0 million in sales from Grand Illusion compared to $2.5
million in sales from such division in the comparable 1998 period. Moreover, the
closing of the Big Ball division during the second quarter of 1999 resulted in
the first nine months of 1999 reflecting only $2.4 million in sales from Big
Ball compared to $7.2 million in sales from such division in the comparable 1998
period.
Total Gross Margin before royalties increased $1.6 million in the first nine
months of 1999 compared to the corresponding period in 1998. Gross Margin
percentage was 11.1% for the first nine months of 1999 compared to 18.2% for the
nine months ended October 3, 1998. The $1.6 million increase in total gross
margin is attributable to a smaller percentage (11.1%) applied to a much larger
sales base ($79.3 million). The reduced gross margin percentage is attributable
in part to $2.4 million of excessive costs to import goods by air freight and
then transport those same goods by overnight courier direct to customer retail
locations, all as a result of late manufacture of such goods. The late
manufacture of goods resulted from delays in opening letters of credit to
foreign manufacturers as a result of limited bank loan availability during the
negotiation of the acquisition of the assets of Tahiti Apparel, Inc. by the
Company. In addition, the gross margin for the first nine months of 1999 was
negatively effected by (a) a $1.9 million net loss on closeout goods and $0.5
million in customer chargebacks related to the Big Ball shutdown and (b)
recognition of an additional $1.5 million loss on the markdown and sale of other
obsolete and slow moving inventory. The $1.9 million net loss on closeout goods
related to the Big Ball shutdown represents a 70% markdown from the total cost
basis of $2.7 million for such inventory. From December 31, 1998 through the
month of May 1999, the Company pursued a vigorous effort to sell this Big Ball
related inventory through normal distribution channels. From January 1999
through April 1999, the company sold a meaningful portion of the inventory at
prices above cost, giving management confidence that the remaining units could
be sold within a reasonable period of time, at prices that at least would allow
the Company to recover its cost plus direct costs of disposition. During the
second quarter of 1999, however, management realized that the unsold inventory
would not be liquidated at normal selling prices. The remaining inventory was
not of a quality or quantity that easily could be sold in the closeout market,
particularly taking into consideration a rapid deterioration in the closeout
market for sports apparel that occurred in the second quarter of 1999 due to a
flood of goods created by the bankruptcies of two major sports apparel
manufacturers. In order to minimize costs, management determined that the
Company should sell the remaining inventory as fast as possible at an estimated
liquidation value (after costs of loading and shipping) of approximately $0.8
million, and booked the net loss in June 1999 based on this estimate.
Royalty expense related to licensed product sales was 5.1% of sales for the nine
months ended October 2, 1999, compared to 8.4% for the corresponding period of
1998. This decrease resulted primarily from an increase by the Company in sales
of proprietary products.
Selling, general and administrative (SG&A) expenses as a percentage of total
sales were 32.4% of sales for the nine months ended October 2, 1999 compared to
35.2% of sales for the corresponding period of 1998, an 8% improvement. The SG&A
expenses increased a total of $11.9 million from $13.8 million in the nine
months ended October 3, 1998 to $25.7 million for the comparable period of 1999.
The change in the total amount of SG&A between 1998 and 1999 is primarily
related to (a) additional sales expenses resulting from the additional $40.0
million of sales in the first nine months of 1999, (b) over $0.7 million in
consulting fees being paid to third parties for services related to accounting
and systems consulting (c) $1.0 million of professional fees, (d) $1.5 million
of temporary and recruiting costs associated with the move to New Jersey, which
were partially offset by $0.7 million in reduced SG&A expenses at the Houston
facility, compared to the same period for 1998, (e) $0.5 million of employee
termination costs and other administrative exit costs related to the Big Ball
shutdown, and (f) $0.8 million of start-up expenses incurred in the second
quarter of 1999 for the expansion of two divisions.
During the first nine months of 1999, the Company continued to implement the
revised business strategy initiated in the last quarter of 1998, which has
resulted in a change from the Company being primarily a manufacturer of products
to primarily a sales, marketing, merchandising and distribution company for
activewear and other clothing. As a result, the Company closed its last
operating facility for the Big Ball division in Houston, Texas during
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the second quarter. The Company's negative Gross Profit for the second quarter
of 1999 includes a $1.9 million net loss on closeout goods and $0.5 million in
customer chargebacks related to this shutdown.
Depreciation and Amortization increased from $2.5 million in the nine months
ended October 3, 1998 to $2.7 million in the comparable 1999 period, primarily
as a result of $1.4 million of amortization of goodwill attributable to the new
Tahiti acquisition, amortization of debt issuance costs of $0.7 million and a
$1.8 million reduction in depreciation expense.
Interest expense for the nine months ended October 2, 1999 was $11.4 million
compared to $7.0 million in the comparable period of 1998. In 1999, $1.4 million
of the $11.4 million of interest expense is non-cash interest amortization
related to the reduction of debt discounts for the WGI, LLC warrants and the
warrants issued to GMAC (See Notes 6 and 8).
FINANCIAL CONDITION
During 1998 and the first nine months of 1999, the Company has undergone a
strategic change from a manufacturing orientation to a sales and marketing
focus. Effective March 22, 1999, Signal Apparel Company, Inc. purchased the
business and assets of Tahiti Apparel Company, Inc., a leading supplier of
ladies and girls activewear, bodywear and swimwear primarily to the mass market
as well as to the mid-tier and upstairs retail channels. Tahiti's products are
marketed pursuant to various licensed properties and brands as well as
proprietary brands of Tahiti. During the fourth quarter of 1998, Signal also
acquired the license and certain assets for the world recognized Umbro soccer
brand in the United States for the department, sporting goods, sports specialty
store and mid-tier retail channels. The acquisition of Tahiti Apparel and the
Umbro license initiative both are part of the Company's ongoing efforts to
improve its operating results. The Company has exited all of its manufacturing
activities to focus exclusively on sales, marketing and merchandising of its
product lines. Following these developments, Signal and its wholly owned
subsidiaries market activewear, bodywear and swimwear in juvenile, youth and
adult size ranges. The Company's products are sold principally to retail
accounts under the Company's proprietary brands, licensed character brands,
licensed sports brands, and other licensed brands. The Company's principal
proprietary brands include G.I.R.L., Bermuda Beachwear, Big Ball and Signal
Sport. Licensed brands include Hanes Sport, BUM Equipment, Jones New York and
Umbro. Licensed character brands include Mickey Unlimited, Winnie the Pooh,
Looney Tunes, Scooby-Doo and Sesame Street; and licensed sports brands include
the logos of Major League Baseball, and the National Hockey League. The
Company's license with the National Football League expired, subject to certain
sell-off rights, on March 31, 1999 and will not be renewed. During the year
ended December 31, 1998, licensed NFL product sales were approximately 15% of
consolidated revenue. The loss of this license could also affect the Company's
ability to sell other professional sports apparel to its customers.
Additional working capital was required in the first nine months of 1999 to fund
the continued losses and payments of interest on the Company's long-term debt to
its secured lenders. The Company's need was met through use of its new credit
facility with its senior lender. At October 2, 1999, the Company had overadvance
borrowings (secured in part by the guarantee of two principal shareholders) of
$53.2 million with its senior lender compared to $34.7 million at October 3,
1998.
The Company's working capital deficit at October 2, 1999 increased $31.7 million
or 56% compared to year end 1998. Excluding the effect of all sales and
acquisitions of divisions, the increase in the working capital deficit was
primarily due to the new term loan being classified as a current liability
($47.7 million), which was partially offset by a decrease in inventories ($12.8
million), a decrease in accounts receivable ($0.1 million), a decrease in
accounts payable and accrued liabilities ($10.2 million), a decrease in the
revolving advance account ($27.3 million), and debt discount associated with the
term loan ($2.3 million). The Company has a "zero base balance" arrangement with
the bank where it maintains its operating account that allows the Company to
cover checks drawn on such account on a daily basis with funds wired from its
senior lender based on the credit facility with the senior lender.
Excluding the effect of all sales and acquisitions of divisions, accounts
receivable decreased $0.1 million or 7% over year-end 1998.
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Excluding the effect of all sales and acquisitions of divisions, inventories
decreased $12.8 million compared to year-end 1998. Inventories decreased as a
result of management's focus on selling all slow moving and obsolete inventory
during the first nine months of 1999, the sale of substantially all of the
remaining Big Ball Sports inventory in connection with the closure of the
Houston facility, and the general reduction of inventory related to the Tahiti
division as of the end of the swimwear season at the end of the second quarter,
1999.
Excluding the effect of all sales and acquisitions of divisions, total current
liabilities increased $6.0 million or 33% over year-end 1998, primarily due to
the term loan being classified as a current liability ($47.7 million), which was
partially offset by a decrease in accounts payable and accrued liabilities
($10.2 million), a decrease in the revolving advance account ($27.3 million) ,
and debt discount associated with the term loan ($2.3 million).
Excluding the effect of all sales and acquisitions of divisions, cash used in
operations was $27.0 million during the first nine months of 1999 compared to
$15.4 million used in operating activities during the same period in 1998. The
increased use of cash during such period was primarily due to the net loss of
$35.2 million during the first nine months of 1999, which was partially offset
by depreciation and amortization ($3.5 million) and non-cash interest ($3.3
million), a decrease in inventories ($12.8 million), a decrease in accounts
receivable ($0.1 million), and a decrease in accounts payable and accrued
liabilities ($10.2 million).
Commitments to purchase equipment totaled less than $0.2 million at October 2,
1999. During the remainder of 1999, the Company anticipates capital expenditures
not to exceed $0.2 million.
Cash provided by investing activities was $2.8 million for the nine months ended
October 2, 1999 compared to cash provided of $0.8 in the comparable period for
1998. This primarily resulted from $2.0 million provided through the sale of the
Heritage division, $0.4 million from the sale of the Grand Illusion Division,
and $0.4 million of restricted cash being released.
Cash provided by financing activities was $23.8 million for the first nine
months of 1999 compared to $14.2 million in the comparable period for 1998.
Excluding the effect of all sales and acquisitions of divisions, the Company had
net borrowings of approximately $20.4 million from its senior lender, after
taking into account borrowings under the new $50 million term loan and the
borrowings under the new revolving credit facility and repayment of the existing
credit facilities maintained by the Company (including those assumed in
connection with the Tahiti acquisition). In addition, the Company sold new 5%
convertible debentures ($5.0 million), which was partially offset by repurchase
of Series G1 Preferred Stock ($2.4 million), and other principal payments on
borrowings (including debt discounts) ($3.4 million).
Approximately $10.0 million was overadvanced under the revolving advance account
at October 2, 1999. The overadvance is secured in part, by the guarantee of two
principal shareholders.
Interest expense for the nine months ended October 2, 1999 was $11.4 million
compared to $7.0 million for the same period in 1998. Excluding the effect of
all sales and acquisitions of divisions, the $11.4 million of interest in this
period included non-cash interest charges of $3.2 million. Total outstanding
debt averaged $92.1 million and $65.9 million for the first nine months of 1999
and 1998, respectively, with average interest rates of 13.5%, and 12.1%,
respectively. The increased interest expense during 1999 reflects non-cash
interest resulting from amortization of debt discount of $2.3 million for the
period.
The Company uses letters of credit to support foreign and some domestic sourcing
of inventory and certain other obligations. Outstanding letters of credit were
$7.9 million at October 2, 1999.
Total Shareholders' Deficit increased $12.8 million to $79.4 million compared to
year-end 1998.
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LIQUIDITY AND CAPITAL RESOURCES
As a result of continuing losses, the Company has been unable to fund its cash
needs through cash generated by operations. The Company's liquidity shortfalls
from operations during these periods have been funded through several
transactions with its principal shareholders and with the Company's senior
lender. These transactions are detailed above in the Financial Condition
section.
As of October 2, 1999, the Company's senior lender waived certain covenant
violations (pertaining to quarterly profits and working capital) under the
Company's factoring agreement. Even though these covenant violations have been
waived, the Company has not yet completed the fourth quarter of 1999 and no
determination can yet be made whether one or more covenant violations exist for
the fourth quarter. Accordingly, GAAP requires that the $50 million term loan be
classified as a current liability even though the term of the loan is longer
than one year.
If the Company's sales and profit margins do not substantially improve in the
near term, the Company will be required to seek additional capital in order to
continue its operations and to move forward with the Company's turnaround plans,
which include seeking appropriate additional acquisitions. To obtain such
additional capital and such financing, the Company may be required to issue
additional securities that may dilute the interests of its stockholders.
At the end of fiscal 1997, the Company implemented a restructuring plan for its
preferred equity and the majority of its subordinated indebtedness (following
approval by shareholders of the issuance of Common Stock in connection
therewith), which resulted in a significant increase in the Company's overall
equity as well as a significant reduction in the Company's level of indebtedness
and ongoing interest expense. In addition, as discussed in Note 10 to the
financial statements, during the first quarter of 1999, the Company sold $5
million of Convertible Debentures to institutional investors, which funds were
used to repurchase the Company's Series G1 Convertible Preferred Stock. The
Company anticipates that funds provided by the WGI Credit Agreement, other
support by WGI LLC and the Bank of New York credit facility will enable the
Company to meet its liquidity needs at least through December 31, 1999.
During the fourth quarter of 1998, the Company reached a decision to close its
printing facility in Chattanooga, Tennessee and it anticipated closing its Big
Ball subsidiary and selling its Grand Illusion subsidiary. The Company recorded
restructuring charges and goodwill write-offs totaling of $7.3 million as a
result of these matters. The Company took this action in an effort to further
improve its cost structure. The Company is considering the sale of certain other
non-essential assets. The Company also has an ongoing cost reduction program
intended to control its general and administrative expenses, and has implemented
an inventory control program to eliminate any obsolete, slow moving or excess
inventory.
On May 12, 1999 the Company issued a WARN notice that the Company would close
its Houston printing facility. The facility was, in fact, shut down on July 11,
1999. The Consolidated Statements of Operations for the nine months ended
October 2, 1999 reflect $1.9 million in negative gross margin on sales of
closeout goods, $0.5 million in negative gross margin on customer chargebacks,
and $0.5 million in employee termination and other administrative exit costs,
all related to the Big Ball shutdown.
Although management believes that the effects of the restructuring, the private
placement of preferred stock and the cost reduction measures described above
have enhanced the Company's opportunities for obtaining the additional funding
required to meet its liquidity requirements beyond December 31, 1999, no
assurance can be given that any such additional financing will be available to
the Company on commercially reasonable terms or otherwise. The Company will need
to significantly improve sales and profit margins or raise additional funds in
order to continue as a going concern.
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YEAR 2000
The Company is in the process of updating its current software, developed for
the apparel industry, which will make the information technology ("IT") systems
year 2000 compliant. This software modification, purchased from a third party
vendor, has been installed, tested and is functioning properly. The Company
continues to test the integrity of the system. Although the Company believes
that the modification to the software which runs its core operations is year
2000 compliant, the Company does utilize other third party equipment and
software that may not be year 2000 compliant. If any of this software or
equipment does not operate properly in the year 2000 and thereafter, the Company
could be forced to make unanticipated expenditures to cure these problems, which
could adversely affect the Company's business. The total cost of the new
software and implementation necessary to upgrade the Company's current IT system
and address the year 2000 issues is estimated to be approximately $100,000.
Planned costs have been budgeted in the Company's operating budget. The
projected costs are based on management's best estimates and actual results
could differ as the new system is implemented. Approximately $40,000 has been
expended as of October 2, 1999. The Company has adopted and implemented a formal
year 2000 compliance plan. This effort is being headed by the Company's new MIS
manager and includes members of various operational and functional units of the
Company. To date, letters/inquiries have been sent to suppliers, vendors, and
others to determine their compliance status. A significant number of responses
have been received. The Company's principal customers, Wal-Mart, Target and
K-Mart, have indicated that they are Year 2000 compliant. The Company is
cognizant of the risk associated with the year 2000 and has begun a series of
activities to reduce the inherent risk associated with non-compliance. The
Company's MIS manager is primarily responsible to insure that all Company
systems are Year 2000 compliant. Among the activities which the Company has not
performed to date include: software (operating systems, business application
systems and EDI system) must be upgraded and tested (although these systems are
integrated and are included in the Company's core accounting system); a few PC's
must be assessed and upgraded for compliance. In the event that the Company or
any of its significant customers or suppliers does not successfully and timely
achieve year 2000 compliance, the Company's business or operations could be
adversely affected. Thus, the Company is in the process of adopting a
contingency plan. The Company is currently developing a "Worst Case Contingency
Plan" which will include generally an environment of utilizing spreadsheets and
other "workaround" programming and procedures. This contingency system will be
activated if the current plans are not successfully implemented and tested by
December 1, 1999. The cost of these alternative measures is estimated to be less
than $25,000. The Company believes that its current operating systems are fully
capable (except for year 2000 data handling) of processing all present and
future transactions of the business. Accordingly, no major efforts have been
delayed or avoided which affect normal business operations as a result of the
incomplete implementation of the year 2000 IT systems. These current systems
will become the foundation of the Company's contingency system.
Part II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
(10.1) Stock Purchase Agreement dated as of July 31, 1999 by and among
the Company (as Seller) and John Prutch (as Buyer) concerning sale
of all of the outstanding common stock of GIDI Holdings, Inc.*
(10.2) Warrant Certificate to purchase 1,536,515 shares of the Company's
Common Stock issued to John Prutch as of August 1, 1999*
(10.3) Separation Agreement dated as of July 31, 1999 by and among the
Company and John W. Prutch.*
(10.4) Letter Agreement dated as of August 1, 1999 concerning the
Revolving Credit, Term Loan and Security Agreement dated March 12,
1999 between the Company and its senior lender, GMAC Commercial
Credit LLC (as successor to BNY Financial Corporation, in its own
behalf and as agent for other participating lenders), waiving
compliance with certain provisions thereof.*
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(10.5) Stock Pledge and Security Agreement and Collateral Assignment of
Stock Purchase Agreement, dated as of August 1, 1999 between the
Company and its senior lender, GMAC Commercial Credit LLC (as
successor to BNY Financial Corporation, in its own behalf and as
agent for other participating lenders), concerning Series A
Preferred Stock of GIDI Holdings, Inc.*
(10.6) Letter Agreement dated November 15, 1999 amending the Revolving
Credit, Term Loan and Security Agreement dated March 12, 1999
between the Company and its senior lender, BNY Financial
Corporation (in its own behalf and as agent for other
participating lenders), and waiving compliance with certain
provisions thereof.*
(10.7) Letter Agreement dated September 14, 1999 regarding the Company's
5% Convertible Subordinated Debentures due March 3, 2002.*
(27) Financial Data Schedule (EDGAR version only)*
* Previously filed with original Quarterly Report on Form 10-Q
for the period ended October 2, 1999.
(b) Reports on Form 8-K:
The Company filed the following Current Reports on Form 8-K during the
quarter:
FINANCIAL
DATE OF REPORT ITEMS REPORTED STATEMENTS FILED
- -------------- -------------- ----------------
July 21, 1999 Item 4 - Changes in Registrant's Certifying None.
Accountant: The resignation of Arthur
Andersen LLP as the Company's independent
public accountants and auditors.
Item 7 - Exhibits: Letter from Arthur None.
Andersen LLP to the Securities and
Exchange Commission concerning its
resignation as the Company's principal
accountant.
August 20, 1999 Item 4 - Changes in Registrant's Certifying None.
Accountant: The appointment of
Goldstein Golub Kessler LLP as the
Company's independent public accountants
and auditors, effective immediately.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused Amendment No.1 to this report to be signed on its
behalf by the undersigned thereunto duly authorized.
SIGNAL APPAREL COMPANY, INC.
(Registrant)
Date: November 30, 1999 /s/ Robert J. Powell
----------------------
Robert J. Powell
Vice President and
Secretary
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