SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended Commission File Number
December 31, 1995 0-5613
- ------------------------- -----------------------
OAK HILL SPORTSWEAR CORPORATION
- -------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
New York 13-2625545
- --------------------------------- -------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) Number)
1411 Broadway, New York, New York 10018
- --------------------------------------- -------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (212) 789-8900
--------------
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $.02
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(Title of Class)
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 by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in the definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
Based on the closing price on March 25, 1996, the aggregate market value of
voting stock held by nonaffiliates of the registrant (assuming that all the
stock referred to under Item 12 hereof are held by affiliates) was approximately
$3,591,000.
As of March 25, 1996, the registrant had 2,057,576 shares of $.02 par value
common stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Document Part of Form 10-K
-------- -----------------
Portions of definitive proxy statement for As referred to in
the 1996 Annual Meeting of Shareholders Part III - Items
to be filed pursuant to Regulation 14A 10, 11, 12 and 13.
under the Securities Exchange Act
of 1934.
Exhibit index of pages 22 - 24
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OAK HILL SPORTSWEAR CORPORATION
ANNUAL REPORT ON FORM 10-K
FOR YEAR ENDED DECEMBER 31, 1995
PART I
Item 1. Business:
Oak Hill Sportswear Corporation was incorporated in New York in 1967 as
Computronic Sciences Inc. The Company amended its certificate of incorporation
in 1969 to change its name to Bio-Medical Sciences, Inc., a manufacturer and
marketer of disposable thermometers and sterilization monitors. In 1979, the
Company acquired substantially all of the assets of Oak Hill Sportswear, Inc.,
and became primarily engaged in the manufacture and marketing of women's apparel
and accessories. In 1983, the Company changed its name to Oak Hill Sportswear
Corporation pursuant to an amendment to its certificate of incorporation. In
1984, the Company sold its disposable medical devices business. From 1984 to
1995, the Company was engaged in the importation, manufacture and marketing of
women's apparel and accessories.
As of June 30, 1995, the Company sold the business and certain assets of
its Sportswear Division, which designed, imported, manufactured and marketed
moderately priced women's apparel. Its products were marketed under various
labels including Victoria Jones, Victoria Sport and Casey & Max, generally for
retail by department, specialty, and chain stores, wholesale membership clubs,
mail order and catalogue companies at "popular" or moderate prices.
During 1995, the Company sold certain of the facilities and machinery in
Mississippi which were previously utilized in connection with the Sportswear
Division. The Company's remaining facilities in Mississippi are leased to a
purchaser of the Company's Sportswear Division. At December 31, 1995, these
properties were carried as assets held for sale as the Company is currently
seeking to sell these properties.
The Company's remaining business is its Harmal Division, which designs,
imports, manufactures and markets moderately priced women's accessories,
principally belts. Its products are marketed nationally under various labels
including Harmal, Dakota and Riders Belts by Harmal, generally for retail by
specialty and chain stores at "popular" or moderate prices (generally $4.00 -
$20.00 per item).
Harmal competes with many other accessories companies, no one or small
group of which is dominant. There are many larger accessories firms with far
greater financial and other resources. Harmal competes on the basis of style,
quality, marketing, price and timeliness. It conducts a very limited advertising
program, primarily in cooperation with customers.
Harmal produces part of its merchandise to satisfy customers' orders or
anticipated orders with the balance based upon management's projections. There
is a relatively short period between the receipt of orders and their completion
so that backlog is not a significant factor in understanding Harmal's
operations.
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Harmal purchases raw materials used for its domestic production from many
suppliers. It does not have any long-term, formal arrangements with any of its
suppliers of raw materials; however, it has had little difficulty in satisfying
its raw material requirements and considers its sources of supply to be
adequate. Harmal imports raw materials and finished belts from foreign
countries, including Argentina, China, Korea and India. Harmal's imports are
subject to the inherent risks attendant to purchasing products abroad, including
the availability of quota and other requisite customs clearances, the imposition
of import duties, political and social instability, currency fluctuations,
restrictions on the transfer of funds and bilateral agreements which limit the
amount of certain categories of merchandise that may be imported into the United
States. Harmal's import operations have not been materially affected by such
factors to date.
The women's accessories business is subject to periodic fashion changes. In
recent years, the retail market for women's belts has been weak, negatively
impacting this division's sales. The reduced sales level during 1995 was
insufficient to cover the Harmal Division's operating expenses, resulting in
operating losses.
At the Company's 1995 Annual Meeting, held on July 24, 1995, shareholders
approved the future sale of the Harmal Division. The Company's Board of
Directors has authorized management to seek a purchaser for the Harmal Division.
As of December 31, 1995, the Harmal Division is being treated as a discontinued
operation, and its assets are being carried as assets held for sale.
As of December 31, 1995, the Company had approximately 39 employees.
Item 2. Properties:
The Company's executive offices are located at 1411 Broadway, New York,
New York, 10018. The Company occupies these premises pursuant to a service
agreement with a purchaser of the Company's former Sportswear Division. All fees
relating to such service agreement were paid in full during 1995 and no further
fees are due.
The Company's Harmal Division leases approximately 60,000 square feet
of manufacturing, warehousing and office space in Long Island City, New York,
and approximately 1,300 square feet of showroom space at 411 Fifth Avenue, New
York, New York 10018.
The Company owns approximately 164,000 square feet of manufacturing and
warehousing facilities in Mississippi. These facilities are currently leased to
a purchaser of the Company's former sportswear business. At December 31, 1995
these properties were carried as assets held for sale as the Company is
currently seeking to sell these properties.
Item 3. Legal proceedings:
There are no material pending legal proceedings involving the Company,
except as referred to in Note 8 to the financial statements.
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Item 4. Submission of matter to a vote of security holders:
No matter was submitted during the fourth quarter of 1995 to a vote of
the Company's shareholders.
PART II
Item 5. Market for the registrant's common stock
and related security holder matters:
The Company's common stock, trading symbol OHSC, is traded on The
Nasdaq Stock Market and is designated as a national market security (NMS).
Through the facilities of the NASDAQ/NMS reporting system, actual sale prices of
the Company's common stock are available. The table below sets forth the high
and low prices for the common stock.
Prices
High Low
1994:
1st quarter 5 3/8 3 9/16
2nd quarter 4 5/8 3 7/8
3rd quarter 4 3/4 3 3/4
4th quarter 5 1/8 4 1/8
1995:
1st quarter 4 1/8 2 7/8
2nd quarter 2 7/8 1 1/2
3rd quarter 2 3/4 1 15/16
4th quarter 2 3/4 1 11/16
1996:
1st quarter
(to March 26, 1996) 2 5/8 2
As of March 26, 1996, there were approximately 555 holders of record of
the Company's common stock.
The Company has not paid any cash dividends and it does not expect to
in the foreseeable future.
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Item 6. Selected financial data:
For the years ended December 31,
1995 1994 1993 1992 1991
(In thousands except per share amounts)
Net (loss) income from
continuing operations ($70) ($206) ($266) $ 338 ($ 547)
(Loss) income from
discontinued
operations (4,908) 435 427 (1,685) 1,005
Loss on disposal of
discontinued
operations (1,861) - - - -
Net (loss) income ($6,839) $229 $161 ($1,347) $ 458
====== ==== ==== ====== ======
Per share data:
Net (loss) income from
continuing operations ($.03) ($.10) ($.13) $.16 ($.27)
(Loss) income from
discontinued
operations (2.39) .21 .21 (.81) .49
Loss on disposal of
discontinued
operations (.90) - - - -
Net (loss) income ($3.32) $.11 $.08 ($.65) $.22
===== ==== ==== ==== ====
Weighted average shares
and common stock
equivalent shares
outstanding:
Primary and fully diluted 2,058 2,067 2,058 2,058 2,058
Balance sheet:
Total assets $ 9,115 $27,364 $25,498 $27,841 $31,742
Long-term debt $ 0 $ 1,581 $ 1,715 $ 1,896 $ 2,087
See notes to consolidated financial statements.
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Item 7. 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, which was
effective as of June 30, 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, plus 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 purchase price paid at closing was based on an estimate
of the net book value of the transferred tangible assets plus $2,000,000. The
cash proceeds, after payment of expenses related to the transaction, were used
primarily to repay the Company's notes payable to its banks and to BankAmerica
Business Credit, Inc. ("BankAmerica"). As of December 31, 1995, the Company
terminated its Loan and Security Agreement with BankAmerica.
During 1995, the Company completed sales of three manufacturing and
warehousing facilities located in Mississippi which were previously utilized in
connection with the Company's Sportswear Division. In addition, the Company sold
machinery and equipment formerly located at the sold facilities and at a
manufacturing facility still owned by the Company. The proceeds of these sales,
net of related expenses, are reflected in the loss on disposal of discontinued
operations.
The Company's Board of Directors authorized management to seek a purchaser
for the Harmal Division of the Company. As a result, the Company has classified
the Harmal Division as a discontinued operation as of December 31, 1995, with
its assets "Held For Sale." The Company has provided reserves for the expected
operating losses prior to the sale of Harmal as well as for the estimated losses
on such sale. Although the Company has begun preliminary discussions regarding
the sale of the Harmal Division, it has not reached an agreement with any
potential purchaser for the sale of the Harmal Division.
Liquidity and capital resources:
Working capital at December 31, 1995 was $6,046,000 as compared to
$9,921,000 at December 31, 1994. The decrease of $3,875,000 was primarily due to
the net loss for the year and the reclassification of the Company's mortgage to
short-term offset in part by the reclassification of certain long-term assets to
short-term assets held for sale.
Accounts receivable were $479,000 at December 31, 1995 as compared to
$10,149,000 at December 31, 1994, a decrease of $9,670,000. The decrease was due
to the sale of the Company's Sportswear Division and subsequent collection of
most of its accounts receivable and the reclassification of the Harmal Division
as an asset held for sale.
Inventories at December 31, 1995 were $0 as compared to $11,583,000 at
December 31, 1993, a decrease of $11,583,000. The decrease was due to the sale
of the Company's Sportswear Division and the reclassification of the Harmal
Division as assets held for sale.
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Management believes that its cash and cash equivalents at December 31, 1995
will be adequate to pay its payables and accrued expenses, to cover its general
and administrative expenses and to cover the potential continuing losses, if any
were not previously provided for, from discontinued operations.
The Board of Directors of the Company intends to determine the best future
course of action for the redeployment of its assets as progress is made in the
sale of Harmal and the resolution of its ongoing tax audit.
Results of operations:
1995 compared to 1994 -
Revenues in 1995 consisted of consulting and interest income. The
consulting income arises from the Company's agreement with a purchaser of its
Sportswear Division and the interest income arises from the investment of the
Company's excess cash and cash equivalents, neither of which occurred during
1994.
General and administrative expenses rose in 1995 compared to 1994 primarily
as a result of the costs which were no longer allocated to its discontinued
operations.
Provision for taxes for 1995 relative to 1994 decreased as a result of the
Company's lower asset base. The Company was taxed in both periods based on a
franchise basis, rather than an income basis, in both state and local
jurisdictions. There is no provision for federal income taxes as the Company
incurred net operating losses in 1995 and utilized approximately $419,000 of its
net operating loss carryforward in 1994 to offset approximately $142,000 of
income taxes payable.
The losses from discontinued operations in 1995 compared to income in 1994
was primarily due to two factors; the Company operated its Sportswear Division
for only the first half of 1995, its seasonally weak period, and the Harmal
Division had significantly lower revenues in 1995 than in 1994. Additionally,
the Company suffered one-time losses relating to the disposal and discontinuance
of the Sportswear and Harmal Divisions.
1994 compared to 1993 -
General and administrative expenses fell in 1994 compared to 1993 primarily
as a result of reduced consulting agreements with directors and lower insurance
expenses.
Provision for taxes for the two years ended December 31, 1994 represents
the provision for state and local income (franchise) tax. There is no provision
for federal income taxes as the Company is utilizing approximately $419,000 of
its net operating loss carryforward in 1994 to offset approximately $142,000 of
federal income taxes payable. In 1993, the Company utilized approximately
$320,000 of its net operating loss carryforward to offset approximately $108,000
of federal income taxes payable.
Results from discontinued operations in 1994 were, in the aggregate,
consistent with results in 1993.
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Item 8. Financial statements and
additional financial data
OAK HILL SPORTSWEAR CORPORATION
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
FILED WITH THE ANNUAL REPORT
OF THE COMPANY ON FORM 10-K
Page
Report of independent accountants 9
Consolidated balance sheets at December 31, 1995 and 1994 10
Consolidated statements of operations for the years ended
December 31, 1995, 1994 and 1993 11
Consolidated statements of stockholders' equity for the years
ended December 31, 1995, 1994 and 1993 12
Consolidated statements of cash flows for the years ended
December 31, 1995, 1994 and 1993 13
Notes to consolidated financial statements 14-20
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REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
and Stockholders of
Oak Hill Sportswear Corporation
In our opinion, the accompanying consolidated balance sheets and the
related consolidated statements of operations, of stockholders' equity and of
cash flows present fairly, in all material respects, the financial position of
Oak Hill Sportswear Corporation and its subsidiary at December 31, 1995 and
1994, and the results of their operations and their cash flows for each of the
three years in the period ended December 31, 1995, in conformity with generally
accepted accounting principles. These financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
As explained in Note 11 to the consolidated financial statements, during
1995 the Company sold certain of the assets of the Sportswear Division and is
presently seeking to sell the Harmal Division.
PRICE WATERHOUSE LLP
New York, New York
March 21, 1996
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OAK HILL SPORTSWEAR CORPORATION
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
December 31,
1995 1994
Assets
Current assets:
Cash and cash equivalents $ 5,823 $ 332
Accounts receivable - net 479 10,149
Inventories 0 11,583
Assets held for sale 2,654 0
Other current assets 159 755
------- -------
Total current assets 9,115 22,819
Property, plant and equipment - net 0 2,742
Goodwill - net 0 1,442
Other assets 0 361
------- -------
$ 9,115 $27,364
======= =======
Liabilities and stockholders' equity
Current liabilities:
Notes payable $ 0 $ 7,199
Current portion of long-term debt 1,000 154
Accounts payable 33 3,968
Accrued expenses 1,514 1,241
Accrued income taxes 522 336
------- -------
Total current liabilities 3,069 12,898
------- -------
Long-term debt 0 1,581
------- -------
Stockholders' equity - see accompanying statement:
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) (4,406) 2,433
Common stock held in treasury, at cost
(2,812,252 shares) (17,008) (17,008)
------- -------
Total stockholders' equity 6,046 12,885
------- -------
$ 9,115 $27,364
======= =======
See notes to consolidated financial statements.
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OAK HILL SPORTSWEAR CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands except
per share amounts)
Years ended December 31,
1 9 9 5 1 9 9 4 1 9 9 3
Revenues $ 159 $ 0 $ 0
General and administrative
expenses 215 176 222
------- ------- -------
Loss from continuing operations
before provision for
taxes (56) (176) (222)
Provision for taxes 14 30 44
------- ------- -------
Loss from continuing
operations ( 70) (206) (266)
------- ------- ------
Discontinued operations:
(Loss) income, net ( 4,908) 435 427
Loss on disposal, net ( 1,861) - -
------- ------- ------
( 6,769) 435 427
------- ------- ------
Net (loss) income ($ 6,839) $ 229 $ 161
======= ======= ======
Per share data:
Loss from continuing
operations ($.03) ($.10) ($.13)
------- ------- ------
Discontinued operations:
(Loss) income, net (2.39) .21 .21
Loss on disposal, net (.90) - -
------- ---- ----
(3.29) .21 .21
------- ---- ----
Net (loss) income, primary
and fully diluted ($ 3.32) $.11 $.08
======= ==== ====
See notes to consolidated financial statements.
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OAK HILL SPORTSWEAR CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(In thousands)
Retained Total
Common stock Capital in earnings stock-
Shares Par In excess of (accum. holders'
Issued Value treasury par value deficit) equity
Balance, December
31, 1992 4,870 $97 ($17,008) $27,363 $2,043 $12,495
Net income for
the year ended
December 31, 1993 161 161
----- --- ------- ------- ------ -------
Balance, December
31, 1993 4,870 97 (17,008) 27,363 2,204 12,656
Net income for
the year ended
December 31, 1994 229 229
----- --- ------- ------- ------ -------
Balance, December
31, 1994 4,870 97 ( 17,008) 27,363 2,433 12,885
Net loss for
the year ended
December 31, 1995 ( 6,839) ( 6,839)
----- --- ------- ------- ------ -------
Balance, December
31, 1995 4,870 $97 ($17,008) $27,363 ($4,406) $ 6,046
===== === ======= ======= ====== =======
See notes to consolidated financial statements.
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OAK HILL SPORTSWEAR CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Years ended December 31,
1995 1994 1993
Cash flows from operating activities:
Net (loss) income ($ 6,839) $ 229 $ 161
Adjustments to reconcile net (loss)
income to net cash provided
by operating activities:
Loss on disposal of disc. operations 1,861 - -
Depreciation and amortization 251 524 551
------- ------ ------
(4,727) 753 712
Changes in assets and liabilities 2,984 (2,400) 2,186
------- ------ ------
Net cash (used in) provided by
operating activities (1,743) (1,647) 2,898
------- ------ ------
Cash flows from investing activities
Capital expenditures - (194) (222)
Net proceeds on disposal of
discontinued operations 15,168 - -
------- ------ ------
Net cash provided by (used in)
investing activities 15,168 (194) (222)
------- ------ ------
Cash flows from financing activities:
Net increase (reduction) in
short term borrowings (7,199) 2,168 (2,519)
Principal payment of long-term debt (735) (164) (168)
------ ------ ------
Net cash (used in) provided by
financing activities (7,934) 2,004 (2,687)
------ ------ ------
Net increase (decrease) in cash 5,491 163 (11)
Cash at beginning of year 332 169 180
------ ------ ------
Cash at end of year $5,823 $ 332 $ 169
====== ====== ======
Supplemental disclosures of cash flow information:
Changes in assets and liabilities:
Accounts receivable $9,144 ($ 629) ($ 987)
Inventories (1,922) (670) 2,696
Other current assets - (411) 293
Other assets 308 (323) 1
Accounts payable and accrued expenses (4,732) (365) 133
Accrued income taxes 186 (2) 50
------ ------ ------
$2,984 ($2,400) $2,186
====== ====== ======
Cash paid (received) during the year for:
Interest $1,073 $1,617 $1,411
Income Taxes 24 32 (6)
See notes to consolidated financial statements.
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OAK HILL SPORTSWEAR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - ACCOUNTING POLICIES:
A. Basis of presentation and principles of consolidation:
The consolidated financial statements include the accounts of the Company
and its wholly-owned subsidiary which was inactive. Certain previously reported
amounts have been reclassified to conform to the 1995 presentation. The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
B. Cash and cash equivalents:
Cash equivalents include all highly liquid debt instruments (primarily U.S.
Treasury obligations) purchased with original maturities of less than three
months. The cash balance at December 31, 1995 includes time deposits amounting
to $1,000,000. The Company determined that all of its investments currently held
in debt securities are "trading securities" as defined by Statement of Financial
Accounting Standards No. 115, "Accounting For Certain Debt and Equity
Securities" and as such are reported at fair value.
C. Inventories:
Inventories are stated at the lower of cost (first-in, first-out) or
market.
D. Depreciation and amortization:
Depreciation was computed principally using the straight-line method over
useful lives of 10-32 years for buildings and 3-10 years for machinery and
equipment.
E. Goodwill:
Goodwill was recorded at cost net of accumulated amortization of $768,000
at December 31, 1994 and was being amortized by the straight-line method over a
period of forty years. The goodwill balance was written off during 1995 in
conjunction with the sale of the Sportswear Division and reclassification of the
Harmal Division.
F. Pension and profit-sharing plans:
The Company has defined contribution pension and profit-sharing plans
covering eligible employees. Costs for these plans are funded as accrued and
there are no prior service costs with respect to these plans.
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G. Earnings per share:
Primary and fully diluted earnings per share for 1995 and 1993 have been
computed using 2,057,576 shares outstanding and for 1994 have been computed
using 2,066,928 shares and common stock equivalent shares outstanding.
H. Revenues:
Consulting fees and interest income are recognized as earned.
I. Stockholders' equity:
The Board of Directors has been authorized to have the Company issue
preferred stock, to establish and designate series, to fix the number of shares
and the rights and preferences. The shares have not been issued and the terms,
rights and preferences have not been established.
J. Fair value of financial instruments:
The fair value of the Company's financial instruments (cash, receivables,
payables and mortgage note) approximates the carrying value due to the
relatively short-term nature of these assets.
NOTE 2 - ACCOUNTS RECEIVABLE:
Accounts receivable are net of allowances of $204,000 and $778,000 at
December 31, 1995 and 1994, respectively.
NOTE 3 - INVENTORIES:
Inventory balances at December 31, 1994 are summarized by major
classification as follows:
Raw materials $ 1,963,000
Work in process 650,000
Finished goods 8,970,000
-----------
$11,583,000
===========
NOTE 4 - PROPERTY, PLANT AND EQUIPMENT:
The major components of property, plant and equipment at December 31, 1994,
recorded at cost, were:
Land and buildings $4,119,000
Machinery and equipment 4,465,000
Leasehold improvements 756,000
----------
9,340,000
Less - Accumulated depre-
ciation and amortization 6,598,000
----------
$2,742,000
==========
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NOTE 5 - NOTES PAYABLE:
The notes payable to lending institutions at December 31, 1994 carried an
average interest rate of 10.47% and arose in connection with the Company's
short-term lines of credit with BankAmerica Business Credit, Inc. and two banks.
The maximum amount borrowed was $11,067,000 in 1995, $23,248,000 in 1994
and $19,581,000 in 1993. Using month-end balances, the average amounts borrowed
in 1995, 1994 and 1993 were $4,473,000, $11,943,000 and $12,702,000,
respectively, at an average interest rate of approximately 17.20%, 13.44% and
9.68% for the respective years.
At December 31, 1994, the Company had a line of credit with BankAmerica
Business Credit, Inc. Under the credit agreement, the Company could borrow
certain amounts based upon eligible accounts receivable and inventory, as
defined in the agreement. The agreement was terminated effective December 31,
1995.
At December 31, 1994, the Company had a secured term loan amounting to
$3,000,000 with Republic National Bank of New York and Chemical Bank. The loan
was fully repaid during 1995.
Other current assets and other assets at December 31, 1994 included
$634,000 of capitalized expenses associated with the Company's financing
activities. During 1994, $254,000 of such capitalized expenses was amortized.
During 1995, the remaining capitalized costs were expensed in connection with
the disposal of the Company's Sportswear Division.
The Company had outstanding letters of credit amounting to $30,000 and
$4,456,000 at December 31, 1995 and 1994, respectively.
NOTE 6 - LONG-TERM DEBT:
The Company has an outstanding mortgage note, which is secured by land and
buildings in Mississippi (and, since September 1995, by a $1,000,000 certificate
of deposit). In July, 1992, the Company's lender renewed its commitment for an
11 year period ending July, 2003 with the interest at 1 1/2% over the bank's
prime lending rate through July, 1995. In September, 1995, the rate was reduced
to 6.2% per annum, through March, 1996. The Company has classified this as a
current liability as it is likely part or all of such note will be repaid in
1996.
NOTE 7 - STOCK OPTIONS:
On October 11, 1994, the Board of Directors adopted a Non-Qualified Stock
Option Plan (the "Plan") covering up to 199,250 shares of the Company's Common
Stock. The Plan provides that (1) the option price per share is to be not less
than 50% of the fair market value of the stock on the date of the grant and (2)
options granted shall be for a term of not more than five years and shall become
exercisable in equal installments in each year of the term on a cumulative
basis, other than the first year, or to the extent that the Board of Directors
shall determine. No option may be granted under the Plan after October 11, 2004.
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At December 31, 1995, the Company reserved 199,250 shares of its Common
Stock for the purposes of the Plan. At that date, there were 74,000 options
outstanding at an exercise price of $4.25.
Additional information concerning stock options under the Plan is
summarized as follows:
Non-Qualified
Stock Option Plan
Shares
-------------------
1995 1994
-------- -------
Options outstanding at beginning of year 174,000 -
Options granted - 174,000
Options canceled or surrendered 100,000 -
Options exercised - -
------- -------
Options outstanding at end of year 74,000 174,000
======= =======
Options exercisable at end of year 18,500 -
======= =======
Options available for future grant 125,250 25,250
======= =======
NOTE 8 - INCOME TAXES:
Provision for income taxes consists of the following components:
December 31,
1995 1994 1993
Current $14,000 $30,000 $44,000
Deferred - - -
------- ------- -------
Total $14,000 $30,000 $44,000
======= ======= =======
The provisions for 1995, 1994 and 1993 represent state and local income
taxes. There is no provision for federal income taxes as the Company had net
losses in 1995, utilized approximately $419,000 of its net operating loss
carryforward to offset approximately $142,000 of federal income taxes otherwise
payable in 1994 and utilized approximately $320,000 of its net operating loss
carryforward to offset approximately $108,000 of federal income taxes otherwise
payable in 1993. At December 31, 1995, the Company has available for Federal
income tax purposes net operating loss carryforwards of approximately $5,225,000
that begin to expire in the year 2007.
17 OF 28 PAGES
<PAGE>
A reconciliation of the statutory income tax rate and the effective tax
rates for 1995, 1994 and 1993 follows:
1995 1994 1993
---- ---- ----
Statutory rate 34.0% 34.0% 34.0%
State and local taxes - 7.6 14.2
Amortization and other
non-deductible expenses (.6) 21.0 23.9
Net operating loss carryforward (22.3) (51.0) (50.6)
Temporary difference relating
to classification of Harmal
net assets as held for sale (11.3) - -
---- ---- ----
( .2%) 11.6% 21.5%
===== ===== =====
The following summarizes the significant components of deferred tax
(liabilities) assets:
December 31, December 31,
1995 1994
Depreciation ($ 44,000) ($177,000)
-------- --------
Gross deferred tax liabilities ( 44,000) ( 177,000)
-------- --------
Inventory 17,000 34,000
Loss carryforward 1,776,000 363,000
Disposal of Harmal Division 755,000 -
--------- --------
Gross deferred tax assets 2,548,000 397,000
--------- --------
Deferred tax asset valuation
allowance 2,504,000 220,000
--------- --------
Deferred Taxes $ - $ -
========= ========
During 1995, the Internal Revenue Service ("IRS") completed a field audit
of the Company's tax returns for the years 1990 through 1992. As a result of the
field audit, the IRS has issued a "30 day letter," assessing a claim of
approximately $1,400,000, including interest. The Company believes it has
meritorious defenses against such assessment and has filed an appeal. The appeal
process is currently underway. The ultimate resolution of the matter could
differ materially in the near term from the amounts accrued.
NOTE 9 - PROFIT-SHARING AND PENSION PLANS:
The Company has non-contributory profit-sharing plans which provide for
annual contributions, at the discretion of the Board of Directors, of between 2%
and 15% of the defined compensation of eligible employees. Profit-sharing
expense was $93,000 in 1995, $137,000 in 1994 and $188,000 in 1993.
18 OF 28 PAGES
<PAGE>
The Company also has defined contribution (money purchase) pension plans
that cover employees who meet specified eligibility requirements. The
contributions required under the plans vary; however, the Company principally
contributes 1% of the first $20,000 and 4% above $20,000 (limited to an
additional $130,000), of the defined compensation of eligible employees. Pension
expense was $91,000 in 1995, $180,000 in 1994 and $239,000 in 1993.
NOTE 10 - ACCRUED EXPENSES:
Accrued expenses at December 31 consist of:
1 9 9 5 1 9 9 4
Salaries - $ 487,000
Pension and profit-sharing
plans $ 198,000 322,000
Accrual related to
discontinued operations 1,190,000 -
Other 126,000 432,000
---------- ----------
$1,514,000 $1,241,000
========== ==========
NOTE 11 - DISCONTINUED 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 accrued expenses relating to the Sportswear Division. The
purchase price was based on an estimate of the net book value of the transferred
tangible assets plus $2,000,000. The cash proceeds, after payment of expenses
related to the transaction, were used primarily to repay the Company's notes
payable to its banks and to BankAmerica Business Credit, Inc. ("BankAmerica").
$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 and other reconciliations
and obligations. During October, 1995, this escrow was terminated in connection
with a partial settlement of post closing adjustments. As of December 31, 1995,
the Company terminated its Loan and Security Agreement with BankAmerica, and
during February, 1996, a final settlement was signed with Donnkenny with respect
to post closing adjustments.
19 OF 28 PAGES
<PAGE>
During 1995, the Company completed sales of three manufacturing and
warehousing facilities located in Mississippi which were previously utilized in
connection with the operations of the Company's Sportswear Division. In
addition, the Company also sold machinery and equipment formerly located at the
sold facilities and at a manufacturing facility still owned by the Company. The
proceeds of these sales, net of related expenses, are reflected in the loss on
disposal of discontinued operations with respect to the Sportswear Division.
At the Company's 1995 Annual Meeting, held on July 24, 1995, shareholders
approved the future sale of the Harmal Division of the Company. The Company's
Board of Directors has authorized management to seek a purchaser for the Harmal
Division. As of December 31, 1995, the Harmal Division is being treated as a
discontinued operation, and its assets are being carried as assets held for
sale.
Discontinued operations include Management's best estimates of the amounts
expected to be realized until and on the sale of its Harmal Division. The
amounts the Company will ultimately realize could differ materially in the near
term from the amounts estimated in arriving at the loss on disposal of the
discontinued operations.
Sales made by the Company's Sportswear Division (until its sale as of June
30, 1995) and Harmal Division in the aggregate in 1995 and 1994 were $35,086,000
and $84,153,000, respectively.
20 OF 28 PAGES
<PAGE>
Item 9. Disagreements on accounting
and financial disclosure:
None.
PART III
Item 10. Directors and executive
officers of the registrant:
Incorporated by reference to information under the caption "Certain
Information Regarding Directors and Nominees" in the Company's definitive proxy
statement to be filed pursuant to Regulation 14A.
Item 11. Executive compensation:
Incorporated by reference to information under the captions "Executive
Compensation", "Compensation Committee Interlocks and Insider Participation",
"Executive Committee's Compensation Report", "Performance Graph" and "Fees Paid
to Directors" in the Company's definitive proxy statement to be filed pursuant
to Regulation 14A.
Item 12. Security ownership of
certain beneficial
owners and management:
Incorporated by reference to information under the captions "Principal
Holders of Common Stock" and "Certain Information Regarding Directors and
Nominees" in the Company's definitive proxy statement to be filed pursuant to
Regulation 14A.
Item 13. Certain relationships and
related transactions:
Incorporated by reference to information under the captions "Fees Paid to
Directors" and "Executive Compensation" in the Company's definitive proxy
statement to be filed pursuant to Regulation 14A.
21 OF 28 PAGES
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement
Schedules, and Reports on
Form 8-K:
Filed herewith or
incorporated by
reference to:
(a) Documents filed as part of this Form 10-K:
1. Consolidated financial statements. The
consolidated financial statements filed as
part of this Form 10-K are listed on the
index thereto, on page 8 hereof.
2. Financial statement schedule. Report of
independent accountants on financial
statement schedule.
Schedule for the three years ended December
31, 1995, 1994 and 1993:
VIII - Valuation and Qualifying Accounts
All other schedules are omitted because
they are not required, are inapplicable or
the information is otherwise shown in the
financial statements or notes thereto.
3. Exhibits filed under Item 601 of Regulation
S-K. (Numbers assigned to the following
exhibits correlate to those used in said
Item.)
(3) Articles of Incorporation and By-Laws.
(a) Certificate of Incorporation, Exhibit 3.1 to the Company's
as amended. Form 10-K's for its years
ended December 31, 1980 and
December 31, 1983, and Exhibit
6 to its Form 10-Q for its
quarter ended June 30, 1988.
(b) By-laws, as amended. Exhibit 3(c) to the Company's
Form 10-K for its year ended
December 31, 1986, and Exhibit
C-1 to its proxy statement
dated May 13, 1987.
22 OF 28 PAGES
<PAGE>
Filed herewith or incorporated
by reference to:
10. Material Contracts.
(d) Profit-sharing and Pension Exhibit to Registration
Plans, as amended. Statement, on Form S-1,
Registration No. 2-40221 of
Oak Hill Sportswear, Inc.,
Exhibit 10(f) to the Company's
Form 10-K for its year ended
December 31, 1985, and Exhibit
10(i) to the Company's Form
10-K for its year ended
December 31,1989.
(f) Non-Qualified Stock Option Exhibit 10 (iii) to the
Plan. Company's Form 10-Q for its
quarter ended September 30,
1994.
(g) Relating to Note with Deposit
Guaranty National Bank.
(1) Note to Deposit Guaranty Exhibit 10(g)(1) to the
National Bank dated Company's Form 10-K for year
July 15, 1992. ended December 31, 1992.
(2) Land Deed of Trust to Exhibit 10(g)(2) to the
Deposit Guaranty National Company's Form 10-K for
Bank dated July 15, 1992. its year ended December
31, 1992.
(h) Relating to the Sale of
the Company's sportswear
division.
(1) Asset Purchase Agreement Annex A to the Company's
between Oak Hill Sportswear Proxy Statement dated
Corporation and Donnkenny June 28, 1995.
Apparel, Inc. dated as
of May 23, 1995.
(2) Amendment No. 1 to Asset Annex A to the Company's
Purchase Agreement Proxy Statement dated
between Oak Hill June 28, 1995.
Sportswear Corporation
and Donnkenny Apparel, Inc.
dated as of June 26, 1995.
23 OF 28 PAGES
<PAGE>
Filed herewith or incorporated
by reference to:
(24) (i) Consent of Price Exhibit 24(i) filed
Waterhouse. herewith.
(b) No report on Form 8-K was filed by the Company during the fourth quarter of
its fiscal year ending December 31, 1995.
(c) See Item 14(a)(3) above.
(d) See Item 14(a)(2) above.
24 OF 28 PAGES
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
ON CONSOLIDATED FINANCIAL STATEMENT SCHEDULE
To the Board of Directors
and Stockholders of
Oak Hill Sportswear Corporation
Our audits of the consolidated financial statements referred to in
our report dated March 21, 1996 appearing on page 9 of the 1995 Annual Report on
this Form 10-K also included an audit of the financial statement schedule listed
in item 14(a) of this Form 10-K. In our opinion, this financial statement
schedule presents fairly, in all material respects, the information set forth
therein when read in conjunction with the related consolidated financial
statements.
PRICE WATERHOUSE LLP
New York, New York
March 21, 1996
25 OF 28 PAGES
<PAGE>
SCHEDULE VIII
OAK HILL SPORTSWEAR CORPORATION
VALUATION AND QUALIFYING ACCOUNTS
(Dollars in thousands)
Additions
------------------
Balance Charged Charged Balance
at be- to costs to other at end
ginning and accounts Deduc- of
of year expenses (a) tions year
Description
Reserves for allowances
and doubtful accounts
for the year ended
December 31, 1995 $778 $242 $ 999 $1,815 $204
==== ==== ====== ====== ====
Reserves for allowances
and doubtful accounts
for the year ended
December 31, 1994 $423 $455 $1,454 $1,554 $778
==== ==== ====== ====== ====
Reserves for allowances
and doubtful accounts
for the year ended
December 31, 1993 $288 $291 $1,127 $1,283 $423
==== ==== ====== ====== ====
(a) Offset against sales.
26 OF 28 PAGES
<PAGE>
S I G N A T U R E S
Pursuant to the requirements of Section 13 or 15(d) 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.
(Registrant) OAK HILL SPORTSWEAR CORPORATION
By: /s/ Arthur L. Asch
---------------------------------------------------------------------------
Arthur L. Asch, Chairman of the Board (Principal executive officer)
By: /s/ Michael A. Asch
---------------------------------------------------------------------------
Michael A. Asch, Vice President (Principal financial officer)
Date: March 27, 1996
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
/s/ Arthur L. Asch /s/ Steven Kotler
- -------------------------------- ------------------------------------------
Arthur L. Asch, Director Steven Kotler, Director
Date: March 27, 1996 Date: March 27, 1996
/s/ Wilmer J. Thomas Jr. /s/ Joseph Greenberger
- -------------------------------- ------------------------------------------
Wilmer J. Thomas Jr., Director Joseph Greenberger, Director
Date: March 27, 1996 Date: March 27, 1996
27 OF 28 PAGES
<PAGE>
Exhibit 24(i)
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectuses
constituting part of the Registration Statements on Form S-8 (No. 33-31587 and
No. 33-31588) of Oak Hill Sportswear Corporation of our report dated March 21,
1996 appearing on page 9 of this Form 10-K. We also consent to the incorporation
by reference of our report on the Financial Statement Schedule, which appears on
page 25 of this Form 10-K.
PRICE WATERHOUSE LLP
New York, New York
March 27, 1996
28 OF 28 PAGES
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<ARTICLE> 5
<CIK> 0000012203
<NAME> OAK HILL SPORTSWEAR CORPORATION
<MULTIPLIER> 1,000
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 5,823
<SECURITIES> 0
<RECEIVABLES> 479
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 9,115
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 9,115
<CURRENT-LIABILITIES> 3,069
<BONDS> 0
0
0
<COMMON> 6,046
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 9,115
<SALES> 0
<TOTAL-REVENUES> 159
<CGS> 0
<TOTAL-COSTS> 215
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (56)
<INCOME-TAX> 14
<INCOME-CONTINUING> (70)
<DISCONTINUED> (6,769)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (6,839)
<EPS-PRIMARY> (3.32)
<EPS-DILUTED> (3.32)
</TABLE>
