<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Form 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended June 30, 1995 Commission File Number 0-5613
OAK HILL SPORTSWEAR CORPORATION
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(Exact name of registrant as specified in its charter)
NEW YORK 13-2625545
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(State or other jurisdiction (I.R.S Employer
of incorporation) Identification Number)
1411 BROADWAY, NEW YORK, NEW YORK 10018
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(Address of principal executive offices) (Zip Code)
(212) 789-8900
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(Registrant's telephone number, including area code)
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(Former name, former address, and former fiscal year,
if changed since last report)
Indicate by checkmark 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
As of August 8, 1994, the registrant had 2,057,576 shares of common stock
outstanding.
Page 1
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OAK HILL SPORTSWEAR CORPORATION
INDEX
PART I - Financial Information PAGE
Unaudited financial statements:
Consolidated balance sheets -
June 30, 1995 and December 31, 1994 3
Consolidated statements of operations -
three months ended June 30, 1995 and 1994 4
Consolidated statements of operations -
six months ended June 30, 1995 and 1994 5
Consolidated statements of cash flows -
six months ended June 30, 1995 and 1994 6
Notes to consolidated financial statements 7-8
Management's discussion and analysis of
financial condition and results of operations 9-10
PART II - Other Information
Item 4. Submission of Matters to a Vote of Security Holders 11
Item 6. Exhibits and Reports on Form 8-K 11
Signatures 12
The accompanying financial statements have been prepared without audit and do
not include all footnotes and disclosures required under generally accepted
accounting principles. Management believes that the results herein reflect all
adjustments which are, in the opinion of management, necessary to fairly state
the results and current financial condition of the Company for the respective
periods. All such adjustments reflected herein are of a normal, recurring
nature. It is recommended that this Report be read in conjunction with the
Company's Annual Report on Form 10-K for its year ended December 31, 1994 and
the Company's Proxy Statement dated June 28, 1995.
Page 2
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OAK HILL SPORTSWEAR CORPORATION
CONSOLIDATED BALANCE SHEETS
(In thousands except share amounts)
(Unaudited)
June 30, December 31,
1995 1994
Assets
Current assets:
Cash $ 194 $ 332
Accounts receivable - net 9,281 10,149
Inventories (Note 2) 2,311 11,583
Receivable for assets sold - net (Note 3) 14,062 0
Assets held for sale 214 0
Other current assets 182 755
--------- ---------
Total current assets 26,244 22,819
Property, plant and equipment - net 1,300 2,742
Goodwill - net 283 1,442
Other assets 18 361
--------- ---------
$ 27,845 $ 27,364
========= =========
Liabilities and stockholders' equity
Current liabilities:
Notes payable - banks $ 8,325 $ 7,199
Current portion of long-term debt 211 154
Accounts payable 6,122 3,968
Accrued expenses 2,353 1,241
Accrued income taxes 319 336
--------- ---------
Total current liabilities 17,330 12,898
Long-term debt 954 1,581
Stockholders' equity:
Preferred stock, $1.00 par value, authorized
1,000,000 shares; -0- shares issued
Common stock, $.02 par value, authorized
12,000,000 shares; 4,869,828 shares issued 97 97
Capital in excess of par value 27,363 27,363
Retained earnings (accumulated deficit) (891) 2,433
Common stock held in treasury, at cost
(2,812,252 shares) (17,008) (17,008)
--------- ---------
Total stockholders' equity 9,561 12,885
--------- ---------
$ 27,845 $ 27,364
========= =========
Page 3
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OAK HILL SPORTSWEAR CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands except per share amounts)
(Unaudited)
Three months ended
June 30,
1995 1994
Net sales $ 960 $ 2,257
-------- --------
Costs and expenses:
Cost of sales 970 1,857
Selling, general and administrative expenses 488 457
-------- --------
1,458 2,314
-------- --------
Operating loss (498) (57)
Interest expense - net 39 38
-------- --------
Loss from continuing operations
before provision for taxes (537) (95)
Provision for taxes
Loss from continuing operations (537) (95)
-------- --------
Discontinued operations:
Loss, net (1,243) (1,055)
Loss on disposal, net (496) --
-------- --------
(1,739) (1,055)
-------- --------
Net loss ($ 2,276) ($ 1,150)
======== ========
Per share data:
Loss from continuing operations ($ .26) ($ .05)
Discontinued operations:
Loss, net (.61) (.51)
Loss on disposal, net (.24) --
-------- --------
(.85) (.51)
-------- --------
Net loss, primary and fully diluted ($ 1.11) ($ .56)
======== ========
Weighted average number of shares outstanding:
Primary and fully diluted 2,058 2,065
Page 4
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OAK HILL SPORTSWEAR CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands except per share amounts)
(Unaudited)
Six months ended
June 30,
1995 1994
Net sales $ 2,578 $ 5,126
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Costs and expenses:
Cost of sales 2,327 4,104
Selling, general and administrative expenses 938 938
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3,265 5,042
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Operating income (loss) (687) 84
Interest expense - net 83 74
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Income (loss) from continuing operations
before provision for taxes (770) 10
Provision for taxes 0 20
------- -------
Loss from continuing operations (770) (10)
------- -------
Discontinued operations:
Loss, net (2,058) (1,057)
Loss on disposal, net (496) --
------- -------
(2,554) (1,057)
------- -------
Net loss ($3,324) ($1,067)
======= =======
Per share data:
Loss from continuing operations ($ .38) ($ .01)
Discontinued operations:
Loss, net (1.00) (.51)
Loss on disposal, net (.24) --
------- -------
(1.24) (.51)
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Net loss, primary and fully diluted ($ 1.62) ($ .52)
======= =======
Weighted average number of shares outstanding:
Primary and fully diluted 2,058 2,066
Page 5
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OAK HILL SPORTSWEAR CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Six Months Ended
June 30,
1995 1994
Cash flows used in operating activities:
Net loss ($ 3,324) ($ 1,067)
Adjustments to reconcile net loss
to net cash used in operating activities:
Loss on disposal of discontinued operations 496 0
Depreciation and amortization 224 263
-------- --------
(2,604) (804)
Changes in assets and liabilities 875 (4,038)
-------- --------
Net cash used in operating activities (1,729) (4,842)
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Cash flows from investing activities:
Capital expenditures 0 (70)
Net proceeds on disposal of disc. operations 1,035 0
-------- --------
Net cash prov. by (used in) inv. activities 1,035 (70)
-------- --------
Cash flows from financing activities:
Net short-term borrowings 1,126 5,125
Principal payment of long-term debt (570) (87)
-------- --------
Net cash provided by financing activities 556 5,038
-------- --------
Net increase (decrease) in cash (138) 126
Cash at beginning of year 332 169
-------- --------
Cash at end of period $ 194 $ 295
======== ========
Supplemental disclosures of cash flow information:
Changes in assets and liabilities:
Accounts receivable $ 868 ($ 449)
Inventories (2,481) (2,581)
Other current assets 97 (227)
Other assets 295 0
Accounts payable and accrued expenses 2,113 (773)
Accrued income taxes (17) (8)
-------- --------
$ 875 ($ 4,038)
======== ========
Cash paid - net during the period for:
Interest $ 717 $ 346
Income taxes 17 16
Non-cash investing activities:
Proceeds from sale of discontinued operations
included in receivable for assets sold-net $ 14,062 --
Page 6
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OAK HILL SPORTSWEAR CORPORATION
Notes to Consolidated Financial Statements
(Unaudited)
Note 1 - Consolidation
The consolidated financial statements include the accounts of the Company
and its wholly-owned subsidiary. The subsidiary had not commenced operations as
of June 30, 1995.
Note 2 - Inventories
Inventories are summarized by major classification as follows:
June 30, December 31,
1995 1994
Raw materials $ 1,253,000 $ 1,963,000
Work in process 21,000 650,000
Finished goods 1,037,000 8,970,000
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$ 2,311,000 $ 11,583,000
Note 3 - Sale of Sportswear Division
Pursuant to an Asset Purchase Agreement between Oak Hill Sportswear
Corporation, a New York corporation (the "Company"), and Donnkenny Apparel, Inc.
("Donnkenny"), dated as of May 23, 1995, as amended (the Asset Purchase
Agreement"), the Company completed, on July 24, 1995, the sale (the "Sale") of
the business and certain assets of the Company's Sportswear Division. The Sale
occurred as of June 30, 1995, subject to the approval of the Company's
shareholders. Such shareholder approval was obtained on July 24, 1995. The
assets sold included the inventory, certain fixed assets, security deposits,
trade names and trademarks, contracts and goodwill of the Company's Sportswear
Division.
The purchase price paid by Donnkenny was $14,616,000 in cash and the
assumption of certain liabilities. The Company retained accounts receivable,
notes payable and certain accounts payable and accrued expenses relating to the
Sportswear Division, which represent substantially all of these balances as
shown on the balance sheet at June 30, 1995. $1,000,000 of the cash purchase
price was placed in a one year escrow to provide security for the Company's
indemnification obligations and its warranty of certain inventory under the
Asset Purchase Agreement. The purchase price was based on an estimate of the net
book value of the transferred tangible assets plus $2,000,000, and it is subject
to a post-closing adjustment if the actual net book value is different from the
estimated net book value. The receivable for assets sold on the Company's
balance sheet at June 30, 1995 is presented net of amounts due to Donnkenny.
After the Sale, the Company retained its Harmal Division, which
manufactures women's accessories. The Company has not yet decided its future
direction, which will depend, in part, upon the proceeds that it realizes from
the Sale, after payment of the retained liabilities and the expenses incurred in
connection therewith, and from certain of its other corporate assets.
Page 7
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In the consolidated financial statements, results of the Company's
Sportswear Division are included in discontinued operations. The sales for
divisions representing discontinued operations for the three and six momth
periods ended June 30, 1995 and 1994 were as follows:
Three months ended Six months ended
June 30, June 30,
1995 1994 1995 1994
---- ---- ---- ----
$14,636 $13,589 $29,853 $29,616
Page 8
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Pursuant to an Asset Purchase Agreement between Oak Hill Sportswear
Corporation, a New York corporation (the "Company"), and Donnkenny Apparel, Inc.
("Donnkenny"), dated as of May 23, 1995, as amended (the "Asset Purchase
Agreement"), the Company completed, on July 24, 1995, the sale (the "Sale") of
the business and certain assets of the Company's Sportswear Division. The Sale
occurred as of June 30, 1995, subject to the approval of the Company's
shareholders. Such shareholder approval was obtained on July 24, 1995. The
assets sold included the inventory, certain fixed assets, security deposits,
trade names and trademarks, contracts and goodwill of the Company's Sportswear
Division.
The purchase price paid by Donnkenny was $14,616,000 in cash and the
assumption of certain liabilities. The Company retained accounts receivable,
notes payable and certain accounts payable and accrued expenses relating to the
Sportswear Division, which represent substantially all of these balances as
shown on the balance sheet at June 30, 1995. $1,000,000 of the cash purchase
price was placed in a one year escrow to provide security for the Company's
indemnification obligations and its warranty of certain inventory under the
Asset Purchase Agreement. The purchase price was based on an estimate of the net
book value of the transferred tangible assets plus $2,000,000, and it is subject
to a post-closing adjustment if the actual net book value is different from the
estimated net book value. The receivable for assets sold on the Company's
balance sheet at June 30, 1995 is presented net of amounts due to Donnkenny.
After the Sale, the Company retained its Harmal Division, which
manufactures women's accessories. The Company has not yet decided its future
direction, which will depend, in part, upon the proceeds that it realizes from
the Sale, after payment of the retained liabilities and the expenses incurred in
connection therewith, and from certain of its other corporate assets.
Liquidity and capital resources:
Working capital at June 30, 1995 amounted to $8,914,000 compared to
$9,921,000 at December 31, 1994, a decrease of $1,007,000 principally due to the
net loss for the period.
As a result of the Sale, in July, 1995 the Company paid off the entire
balance of its notes payable. It continues to have long-term debt outstanding,
which represents a mortgage secured by the Company's fixed assets in
Mississippi. Upon collection of its accounts receivable and payment of its
accounts payable and accrued expenses, the Company will have a positive net cash
balance. The Company believes that such net cash balance will provide all the
funds necessary for working capital for its operations.
Page 9
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Results of operations (continuing operations only):
Sales for the second quarter of 1995 amounted to $960,000 compared to
$2,257,000 for the second quarter of 1994, a decrease of $1,297,000. Sales for
the six months ended June 30, 1995 amounted to $2,578,000 compared to $5,126,000
for the comparable period in 1994, a decrease of $2,548,000. In both periods
sales decreases in the Company's accessories division were primarily due to a
weak retail market for belts, the division's primary product.
Gross profit for the second quarter of 1995 amounted to ($10,000) compared
to $400,000 for the second quarter of 1994, a decrease of $410,000. For the six
month period ended June 30, 1995 gross profit was $251,000 compared to
$1,022,000 for the comparable period in 1994, a decrease of $771,000. In both
periods, decreases in gross profit in the Company's accessories division were
caused by sharply lower sales and lower margins due to the underabsorption of
fixed manufacturing and warehousing expenses.
Selling, general and administrative expenses for the second quarter of 1995
and six months ended June 30, 1995 were nearly equal to the comparable periods
in 1994.
Interest expense-net for the second quarter ended June 30, 1995 amounted to
$39,000 compared to $38,000 in the second quarter of 1994. Interest expense-net
for the six months ended June 30, 1995 amounted to $83,000 compared to $74,000
in the comparable period of 1994. In both periods, lower long-term debt balances
were offset by higher average interest rates.
The Company had no provisions for tax or tax benefit in the second quarter
or six months ended June 30, 1995 because it incurred a loss in both periods and
had net operating loss carryforwards. The Company had no provisions for tax or
tax benefit in the second quarter ended June 30, 1994. The Company had a
provision for state and local taxes in the six months ended June 30, 1994 based
on profits in the first quarter of 1994. No accrual for federal income taxes was
made because the Company incurred a loss in both periods and had net operating
loss carryforwards.
Page 10
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PART II. OTHER INFORMATION
Item 4. Submission of Matters to Vote of Security Holders
(a) The Annual Meeting of the shareholders of the Company was held on July
24, 1995.
(b) At said Annual Meeting, the following persons were elected directors,
with the following number of shares voted for and withheld:
For Withheld
--------- --------
Arthur L. Asch 1,899,640 24,696
Joseph Greenberger 1,899,647 24,689
Steven Kotler 1,899,647 24,689
Wilmer J. Thomas, Jr. 1,897,297 27,039
(c) At said Annual Meeting, a Non-Qualified Stock Option Plan for the
Company was approved by a vote of 1,341,036 shares for and 183,688
shares against, with 10,827 abstaining and broker non-votes.
(d) At said Annual Meeting, the sale of substantially all of the assets of
the Company through the sale of the business and certain assets of the
Company's Sportswear Division to Donnkenny Apparel, Inc. and the
possible future sale of the Company's Harmal Division was approved by
a vote of 1,509,758 shares for and 24,888 shares against, with 905
abstaining and broker non-votes.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
2(a) Asset Purchase Agreement between Oak Hill Sportswear Corporation
and Donnkenny Apparel, Inc. dated as of May 23, 1995
(incorporated by reference to Annex A to the Company's Proxy
Statement dated June 28, 1995).
2(b) Amendment No. 1 to Asset Purchase Agreement between Oak Hill
Sportswear Corporation and Donnkenny Apparel, Inc. dated as of
June 26, 1995 (incorporated by reference to Annex A to the
Company's Proxy Statement dated June 28, 1995).
(b) Reports on Form 8-K
No report on Form 8-K was filed by the Company during the quarter
ended June 30, 1995. The Company filed a report on Form 8-K, dated
August 7, 1995, reporting information under Item 2 ("Acquisition or
Disposition of Assets") and Item 7 ("Financial Statements, Pro Forma
Financial Information and Exhibits"). The Company filed the following
financial statements therewith as an exhibit:
99 Pro Forma Unaudited Consolidated Balance Sheet as of March 31,
1995 and Pro Forma Unaudited Consolidated Statements of
Operations for the year ended December 31, 1994 and the three
months ended March 31, 1995.
Page 11
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SIGNATURES
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.
OAK HILL SPORTSWEAR CORPORATION
(Registrant)
Date: August 14, 1995 By: /s/ Arthur L. Asch
------------------
Arthur L. Asch, Chairman of the Board
Date: August 14, 1995 By: /s/ Michael A. Asch
-------------------
Michael A. Asch, Vice President
Page 12
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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<CASH> 194
<SECURITIES> 0
<RECEIVABLES> 23,343
<ALLOWANCES> 00,000
<INVENTORY> 2,311
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<BONDS> 954
<COMMON> 9,561
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<SALES> 960
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<INCOME-TAX> (537)
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