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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 March 31, 1995 Commission File Number 0-5613
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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
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As of May 11, 1995, the registrant had 2,057,576 shares of common stock
outstanding.
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OAK HILL SPORTSWEAR CORPORATION
INDEX
PART I - Financial Information PAGE
Unaudited financial statements:
Consolidated balance sheets -
March 31, 1995 and December 31, 1994 3
Consolidated statements of operations -
three months ended March 31, 1995 and 1994 4
Consolidated statements of cash flows -
three months ended March 31, 1995 and 1994 5
Notes to consolidated financial statements 6
Management's discussion and analysis of
financial condition and results of operations 7-8
PART II - Other Information
Item 6. Exhibits and Reports on Form 8-K 9
Signatures 10
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. 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.
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OAK HILL SPORTSWEAR CORPORATION
CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
March 31, December 31,
1995 1994
Assets
Current assets:
Cash $ 234 $ 332
Accounts receivable - net 12,072 10,149
Inventories (Note 2) 10,810 11,583
Other current assets 646 755
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Total current assets 23,762 22,819
Property, plant and equipment - net 2,652 2,742
Goodwill - net 1,429 1,442
Other assets 311 361
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$28,154 $27,364
======= =======
Liabilities and stockholders' equity
Current liabilities:
Notes payable - banks $ 9,144 $ 7,199
Current portion of long-term debt 154 154
Accounts payable and accrued expenses 5,143 5,209
Accrued income taxes 330 336
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Total current liabilities 14,771 12,898
Long-term debt 1,546 1,581
Stockholders' equity:
Preferred stock, $1.00 par value, authorized
1,000,000 shares; -0- shares issued at
March 31, 1995 and December 31, 1994
Common stock, $.02 par value, authorized
12,000,000 shares; 4,869,828 shares issued
at March 31, 1995 and December 31, 1994 97 97
Capital in excess of par value 27,363 27,363
Retained earnings 1,385 2,433
Common stock held in treasury, at cost
(2,812,252 shares at March 31, 1995
and December 31, 1994) (17,008) (17,008)
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Total stockholders' equity 11,837 12,885
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$28,154 $27,364
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OAK HILL SPORTSWEAR CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands except per share amounts)
(Unaudited)
Three months ended
March 31,
1995 1994
Net sales $16,835 $18,896
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Costs and expenses:
Cost of sales 13,953 14,571
Selling, general and administrative expenses 3,521 3,966
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17,474 18,537
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Operating income (loss) (639) 359
Interest expense - net 409 256
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Income (loss) before provision
for taxes (1,048) 103
Provision for taxes 0 20
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Net income (loss) ($ 1,048) $ 83
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Per share data:
Primary and fully diluted ($ .51) $ .04
Weighted average number of shares outstanding:
Primary and fully diluted 2,058 2,067
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OAK HILL SPORTSWEAR CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Three Months Ended
March 31,
1995 1994
Cash flows from (used in) operating activities:
Net income (loss) ($1,048) $ 83
Adjustments to reconcile net income (loss)
to net cash used in operating activities:
Depreciation and amortization 126 129
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(922) 212
Changes in assets and liabilities (1,063) (4,972)
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Net cash used in operating activities (1,985) (4,760)
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Cash flows used in investing activities:
Capital expenditures (23) (6)
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Cash flows from (used in) financing activities:
Net short-term borrowings 1,945 4,867
Principal payment of long-term debt (35) (45)
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Net cash provided by financing activities 1,910 4,822
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Net increase (decrease)in cash (98) 56
Cash at beginning of year 332 169
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Cash at end of period $ 234 $ 225
====== ======
Supplemental disclosures of cash flow information:
Changes in assets and liabilities:
Accounts receivable ($1,923) ($5,417)
Inventories 773 286
Other current assets 109 (144)
Other assets 50 (1)
Accounts payable and accrued expenses (66) 296
Accrued income taxes (6) 8
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($1,063) ($4,972)
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Cash paid - net during the period for:
Interest $ 300 $ 241
Income taxes 6 12
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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 March 31, 1995.
Note 2 - Inventories
Inventories used in the calculation of cost of goods sold for the
Company are summarized by major classification as follows:
March 31, December 31,
1995 1994
Raw materials $ 2,280,000 $ 1,963,000
Work in process 757,000 650,000
Finished goods 7,773,000 8,970,000
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$10,810,000 $11,583,000
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Liquidity and capital resources:
Working capital at March 31, 1995 amounted to $8,991,000 compared to
$9,921,000 at December 31, 1994. The decrease of $930,000 was principally due
to the net loss for the period.
Based upon the Company's first quarter results, current operations and
business plans, Management believes that the Company's cash balance of
$234,000 at March 31, 1995, its cash flow from operations, which Management
believes will continue to be negative in the second quarter of 1995, and
borrowings under the Amended Loan and Security Agreement will not provide it,
at certain times within its business cycle, with all of the funds necessary
for its working capital and capital expenditures. Management is exploring
various options, including modifying the business plans to reduce expenses
and curtail projected levels of sales and inventory, revising the Company's
existing borrowing arrangements (subject to the lender's approval) and
selling certain capital assets. In addition, Management is considering
raising additional capital and the sale of one or more of the Company's
divisions. While the Company can give no assurance as to which specific
actions can be effectuated, Management believes that several of these steps
can be taken in a timely manner.
Accounts receivable were $12,072,000 at March 31, 1995 as compared to
$10,149,000 at December 31, 1994, an increase of $1,923,000. The increase
was primarily due to the higher level of sales in the latter part of the
first quarter of 1995 as compared to the latter part of the fourth quarter of
1994, which for seasonal reasons has a low sales level.
Inventories at March 31, 1995 were $10,810,000 as compared to $11,583,000
at December 31, 1994, a decrease of $773,000. The decrease was due to a
reduction of inventories to levels consistent with seasonal requirements.
Results of operations:
Sales for the first quarter of 1995 amounted to $16,835,000 as compared
to $18,896,000 for the first quarter of 1994, a decrease of $2,061,000. The
decrease was attributable to lower sales in both the sportswear and
accessories divisions. The decrease in sales in the sportswear division was
mainly due to a large return from a customer because of a latent
manufacturing defect.
Gross profit for the first quarter of 1995 amounted to $2,882,000 as
compared to $4,325,000 for the first quarter of 1994, a decrease of
$1,443,000. Lower sales in the sportswear and accessories divisions and
lower gross margins in each of the Company's operating divisions, including a
substantial loss incurred because of the large product return noted above,
resulted in the reduction as compared to the prior year period.
Selling, general and administrative expenses for the first quarter of
1995 were 11% lower than in the comparable period in 1994. The decrease was
principally due to the Company's cost reduction program.
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Interest expense-net for the first quarter ended March 31, 1995 amounted
to $409,000 as compared to $256,000 in the comparable period in 1994. The
increase was primarily due to higher average effective interest rates and
amortization of prepaid financing expenses.
The Company had no provisions for tax or tax benefit in the first quarter
of 1995 because it incurred a loss and had net operating loss carryforwards.
The Company had a provision of $20,000 for state and local taxes in the first
quarter of 1994. No accrual for federal income taxes was made because the
Company had net operating loss carryforwards.
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PART II. OTHER INFORMATION
Item 5. Other Information
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On May 15, 1995, the Company issued a press release regarding a
letter of intent signed on May 12, 1995 for the sale of the
Company's sportswear division to Donnkenny Apparel, Inc. The
relevant portion of the press release reads as follows:
Management has been exploring various alternatives to improve its
financial position and on May 12, 1995, Oak Hill Sportswear
Corporation signed a letter of intent with Donnkenny Apparel, Inc., a
subsidiary of Donnkenny, Inc. (NASDAQ: DNKY) for the sale of the
Company's sportswear division to Donnkenny. Depending upon the book
value at closing of the inventory and certain other assets being
acquired, the Company estimates that the gross cash proceeds from the
transaction will be approximately $14,000,000. However, the net cash
proceeds will be a significantly lesser amount, not yet determinable,
but believed to be less than half of the gross proceeds, taking into
account that Oak Hill Sportswear Corporation will retain all accounts
payable and other liabilities and accounts receivable of the
sportswear division, as well as all corporate liabilities, including
costs relating to the transaction and obligations to its bank
lenders. In addition, Oak Hill Sportswear Corporation will retain its
accessories division, which is continuing to experience operating
losses, and the fixed assets and part of the operations of its
manufacturing division.
The proposed transaction is subject to the receipt of a fairness
opinion, the approval of Oak Hill Sportswear Corporation's Board of
Directors, the execution of a definitive agreement and the favorable
vote of at least two-thirds of its outstanding stock. The transaction
is also subject to Donnkenny receiving bank financing and approval of
its Board of Directors. Subject to such conditions, the proposed sale
is expected to be completed by June 30, 1995.
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
Reports on Form 8-K
-------------------
No report on Form 8-K was filed during the quarter ended March 31,
1995.
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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: May 15, 1995 By: /s/ Arthur L. Asch
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Arthur L. Asch, Chairman of the Board
Date: May 15, 1995 By: /s/ Michael A. Asch
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Michael A. Asch, Vice President
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<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Company's Form 10-K for the first quarter ended March 31, 1995 and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1995
<PERIOD-END> MAR-31-1995
<CASH> 234
<SECURITIES> 0
<RECEIVABLES> 12,072
<ALLOWANCES> 0
<INVENTORY> 10,810
<CURRENT-ASSETS> 23,762
<PP&E> 2,652
<DEPRECIATION> 0
<TOTAL-ASSETS> 28,154
<CURRENT-LIABILITIES> 14,771
<BONDS> 1,546
<COMMON> 11,837
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 28,154
<SALES> 16,835
<TOTAL-REVENUES> 16,835
<CGS> 13,953
<TOTAL-COSTS> 13,953
<OTHER-EXPENSES> 3,521
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 409
<INCOME-PRETAX> (1,048)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,048)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,048)
<EPS-PRIMARY> (.51)
<EPS-DILUTED> (.51)
</TABLE>
