<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 September 30, 1995 Commission File Number 0-5613
-------------------- ----------
OAK HILL SPORTSWEAR CORPORATION
- ------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
NEW YORK 13-2625545
- ------------------------------------------------------------------------------
(State or other jurisdiction (I.R.S Employer
of incorporation) Identification Number)
1411 BROADWAY, NEW YORK, NEW YORK 10018
- ------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(212) 789-8900
- ------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
- ------------------------------------------------------------------------------
(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 November 10, 1995, the registrant had 2,057,576 shares of common stock
outstanding.
Page 1
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OAK HILL SPORTSWEAR CORPORATION
INDEX
PAGE
PART I - Financial Information
Unaudited financial statements:
Consolidated balance sheets -
September 30, 1995 and December 31, 1994 3
Consolidated statements of operations -
three months ended September 30, 1995 and 1994 4
Consolidated statements of operations -
nine months ended September 30, 1995 and 1994 5
Consolidated statements of cash flows -
nine months ended September 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 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
<PAGE>
OAK HILL SPORTSWEAR CORPORATION
CONSOLIDATED BALANCE SHEETS
(In thousands except share amounts)
(Unaudited)
<TABLE>
<CAPTION>
September 30, December 31,
1995 1994
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 5,716 $ 332
Accounts receivable - net 2,536 10,149
Inventories (Note 2) 2,064 11,583
Assets held for sale 214 0
Other current assets 255 755
-------- --------
Total current assets 10,785 22,819
Property, plant and equipment - net 1,269 2,742
Goodwill - net 280 1,442
Other assets 16 361
-------- --------
$ 12,350 $ 27,364
======== ========
Liabilities and stockholders' equity
Current liabilities:
Notes payable - banks $ 699 $ 7,199
Current portion of long-term debt 0 154
Accounts payable 713 3,968
Accrued expenses 716 1,241
Accrued income taxes 315 336
-------- --------
Total current liabilities 2,443 12,898
Long-term debt 1,000 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) (1,545) 2,433
Common stock held in treasury, at cost
(2,812,252 shares) (17,008) (17,008)
-------- --------
Total stockholders' equity 8,907 12,885
-------- --------
$ 12,350 $ 27,364
======== ========
</TABLE>
Page 3
<PAGE>
OAK HILL SPORTSWEAR CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Three months ended
September 30,
1995 1994
<S> <C> <C>
Net sales $ 1,671 $ 2,353
------- -------
Costs and expenses:
Cost of sales 1,377 1,781
Selling, general and administrative expenses 536 437
------- -------
1,913 2,218
------- -------
Operating (loss) income (242) 135
Interest (income) expense - net (25) 41
------- -------
(Loss) income from continuing operations
before provision for taxes (217) 94
Provision for taxes -- 10
------- -------
(Loss) income from continuing operations (217) 84
------- -------
Discontinued operations:
(Loss) income, net (313) 1,735
Loss on disposal, net (124) --
------- -------
(437) 1,735
------- -------
Net (loss) income ($ 654) $ 1,819
======= =======
Per share data:
(Loss) income from continuing operations ($ .11) $ .04
Discontinued operations:
(Loss) income, net (.15) .84
Loss on disposal, net (.06) --
------- -------
(.21) .84
------- -------
Net (loss) income, primary and fully diluted ($ .32) $ .88
======= =======
Weighted average number of shares outstanding:
Primary and fully diluted 2,058 2,066
</TABLE>
Page 4
<PAGE>
OAK HILL SPORTSWEAR CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Nine months ended
September 30,
1995 1994
<S> <C> <C>
Net sales $ 4,249 $ 7,479
------- -------
Costs and expenses:
Cost of sales 3,704 5,885
Selling, general and administrative expenses 1,474 1,375
------- -------
5,178 7,260
------- -------
Operating (loss) income (929) 219
Interest expense - net 58 115
------- -------
(Loss) income from continuing operations
before provision for taxes (987) 104
Provision for taxes -- 30
------- -------
(Loss) income from continuing operations (987) 74
------- -------
Discontinued operations:
(Loss) income, net (2,371) 678
Loss on disposal, net (620) --
------- -------
(2,991) 678
------- -------
Net (loss) income ($3,978) $ 752
======= =======
Per share data:
(Loss) income from continuing operations ($ .48) $ .03
Discontinued operations:
(Loss) income, net ($ 1.15) .33
Loss on disposal, net (.30) --
------- -------
(1.45) .33
------- -------
Net (loss) income, primary and fully diluted ($ 1.93) $ .36
======= =======
Weighted average number of shares outstanding:
Primary and fully diluted 2,058 2,066
</TABLE>
Page 5
<PAGE>
OAK HILL SPORTSWEAR CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
1995 1994
<S> <C> <C>
Cash flows used in operating activities:
Net (loss) income ($ 3,978) $ 752
Adjustments to reconcile net (loss) income
to net cash used in operating activities:
Loss on disposal of discontinued operations 620 0
Depreciation and amortization 258 395
-------- --------
(3,100) 1,147
Changes in assets and liabilities 746 (16,306)
-------- --------
Net cash used in operating activities (2,354) (15,159)
-------- --------
Cash flows from investing activities:
Capital expenditures 0 (114)
Net proceeds on disposal of disc. operations 14,973 0
-------- --------
Net cash prov. by (used in) inv. activities 14,973 (114)
-------- --------
Cash flows from financing activities:
Net short-term (repayments) borrowings (6,500) 15,515
Principal payment of long-term debt (735) (126)
-------- --------
Net cash (used in) provided by fin. activities (7,235) 15,389
-------- --------
Net increase in cash 5,384 116
Cash at beginning of year 332 169
-------- --------
Cash at end of period $ 5,716 $ 285
======== ========
Supplemental disclosures of cash flow information:
Changes in assets and liabilities:
Accounts receivable $ 7,613 ($13,346)
Inventories (2,234) (3,752)
Other current assets 24 (610)
Other assets 297 (312)
Accounts payable and accrued expenses (4,933) 1,716
Accrued income taxes (21) (2)
-------- --------
$ 746 ($16,306)
======== ========
Cash paid - net during the period for:
Interest $ 722 $ 1,405
Income taxes 21 32
</TABLE>
Page 6
<PAGE>
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 September 30, 1995.
Note 2 - Inventories
Inventories are summarized by major classification as follows:
September 30, December 31,
1995 1994
Raw materials $1,131,000 $ 1,963,000
Work in process 16,000 650,000
Finished goods 917,000 8,970,000
---------- -----------
$2,064,000 $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. The balance of notes payable at September 30, 1995 is
offset by a receivable from BankAmerica Business Credit, Inc. (included in
accounts receivable) representing amounts to be reimbursed by Donnkenny. The
purchase price was based on an estimate of the net book value of the transferred
tangible assets plus $2,000,000, and it remains subject to post-closing
adjustments if the actual net book value is different from the estimated net
book value. $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. During
October, 1995, this escrow was terminated in connection with a partial
settlement of post closing adjustments. The accounts receivable on the Company's
balance sheet at September 30, 1995 includes amounts due from Donnkenny and
BankAmerica and the accounts payable on the Company's balance sheet at September
30, 1995 includes amounts due to Donnkenny.
Page 7
<PAGE>
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 its liquid assets, after payment of
the retained liabilities and the expenses incurred in connection with the Sale,
the final settlement with Donnkenny under the Asset Purchase Agreement, and the
possible sale of its other corporate assets, including the Harmal Division.
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 nine month
periods ended September 30, 1995 and 1994 were as follows:
Three months ended Nine months ended
September 30, September 30,
1995 1994 1995 1994
---- ---- ---- ----
$ 0 $26,298 $29,853 $55,914
Page 8
<PAGE>
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. The balance of notes payable at September 30, 1995 is
offset by a receivable from BankAmerica Business Credit, Inc. (included in
accounts receivable) representing amounts to be reimbursed by Donnkenny. The
purchase price was based on an estimate of the net book value of the transferred
tangible assets plus $2,000,000, and it remains subject to post-closing
adjustments if the actual net book value is different from the estimated net
book value. $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. During
October, 1995, this escrow was terminated in connection with a partial
settlement of post closing adjustments. The accounts receivable on the Company's
balance sheet at September 30, 1995 includes amounts due from Donnkenny and
BankAmerica and the accounts payable on the Company's balance sheet at September
30 includes 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 its liquid assets after payment of the retained
liabilities and the expenses incurred in connection with the Sale, the final
settlement with Donnkenny under the Asset Purchase Agreement, and the possible
sale of its other corporate assets, including the Harmal Division.
Liquidity and capital resources:
Working capital at September 30, 1995 amounted to $8,342,000 compared to
$9,921,000 at December 31, 1994, a decrease of $1,579,000 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. The balance of notes payable at September 30, 1995
is offset by a receivable from BankAmerica Business Credit, Inc. (included in
accounts receivable) for amounts to be reimbursed by Donnkenny. The Company
continues to have long-term debt outstanding, which represents a mortgage
secured by the Company's fixed assets in Mississippi and a certificate of
deposit. At September 30, 1995, the Company had a cash and cash equivalent
balance of $5,716,000. The Company believes that such cash and cash equivalent
balance will provide the funds necessary for its operations.
Page 9
<PAGE>
Results of operations (continuing operations only):
Sales for the third quarter of 1995 amounted to $1,671,000 compared to
$2,353,000 for the third quarter of 1994, a decrease of $682,000. Sales for the
nine months ended September 30, 1995 amounted to $4,249,000 compared to
$7,479,000 for the comparable period in 1994, a decrease of $3,230,000. In both
periods sales decreases in the Company's Harmal Division were primarily due to a
weak retail market for belts, the division's primary product.
Gross profit for the third quarter of 1995 amounted to $294,000 compared to
$572,000 for the third quarter of 1994, a decrease of $278,000. For the nine
month period ended September 30, 1995 gross profit was $545,000 compared to
$1,594,000 for the comparable period in 1994, a decrease of $1,049,000. In both
periods, decreases in gross profit in the Company's Harmal 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 third quarter of 1995
and nine months ended September 30, 1995 were nearly equal to the comparable
periods in 1994 with the exception of a $100,000 reserve for bad debts in the
third quarter in connection with the Chapter 11 filing of a customer.
Interest income-net for the third quarter ended September 30, 1995 amounted
to $25,000 compared to an expense of $41,000 in the third quarter of 1994.
Interest expense-net for the nine months ended September 30, 1995 amounted to
$58,000 compared to $115,000 in the comparable period of 1994. In both periods,
the decrease in interest expense was due to lower average debt balances and
interest income from the Company's cash and cash equivalent balance during the
third quarter of 1995.
The Company had no provisions for tax or tax benefit in the third quarter or
nine months ended September 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 third quarter ended September 30, 1994. The Company had a
provision for state and local taxes in the nine months ended September 30, 1994
based on profits in the period. No accrual for federal income taxes was made
because the Company had net operating loss carryforwards in excess of its net
income.
The Company's loss from discontinued operations in the third quarter of 1995
was primarily the result of diminished accounts receivable collections relating
to chargebacks from customers, and expenses in excess of amounts accrued at June
30, 1995.
The Company's loss on sale of assets in the third quarter is attributable to
post-closing adjustments of asset valuations relating to actual asset values
versus estimated values used at closing.
Page 10
<PAGE>
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
--------------------------------
(b) Reports on Form 8-K
-------------------
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
<PAGE>
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: November 14, 1995 By: /s/ Arthur L. Asch
-------------------------------------
Arthur L. Asch, Chairman of the Board
Date: November 14, 1995 By: /s/ Michael A. Asch
-------------------------------------
Michael A. Asch, Vice President
Page 12
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
September 30, 1995 Form 10-Q and is qualified in its entirety by reference to
such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<CASH> 5,716
<SECURITIES> 0
<RECEIVABLES> 2,536
<ALLOWANCES> 0
<INVENTORY> 2,064
<CURRENT-ASSETS> 10,785
<PP&E> 1,269
<DEPRECIATION> 0
<TOTAL-ASSETS> 12,350
<CURRENT-LIABILITIES> 2,443
<BONDS> 1,000
<COMMON> 8,907
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 12,350
<SALES> 1,671
<TOTAL-REVENUES> 1,671
<CGS> 1,377
<TOTAL-COSTS> 1,377
<OTHER-EXPENSES> 536
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (25)
<INCOME-PRETAX> (217)
<INCOME-TAX> 0
<INCOME-CONTINUING> (217)
<DISCONTINUED> (437)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (654)
<EPS-PRIMARY> (.32)
<EPS-DILUTED> (.32)
</TABLE>
