<PAGE>
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, 1996 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
- --------------------------------------------------------------------------------
(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. [X]
Based on the closing price on March 10, 1997, 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
$1,925,000.
As of March 10, 1997, 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 1997 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 21 - 23
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OAK HILL SPORTSWEAR CORPORATION
ANNUAL REPORT ON FORM 10-K
FOR YEAR ENDED DECEMBER 31, 1996
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 and
mail order and catalogue companies at "popular" or moderate prices.
During 1995, the Company also sold certain of the facilities and
machinery in Mississippi which were previously utilized in connection with the
Sportswear Division. During a portion of 1995 and 1996, the Company's remaining
facilities in Mississippi were leased to a purchaser of the Company's Sportswear
Division. As of December 31, 1996, these properties were carried as assets held
for sale as the Company is currently seeking to sell the properties.
At the Company's 1995 Annual Meeting, held on July 24, 1995,
shareholders approved the potential future sale of the business and assets of
the Company's Harmal Industries women's accessories division. The Company's
Board of Directors has authorized management to seek a purchaser for the Harmal
Division. Since December 31, 1995, the Harmal Division has been treated as a
discontinued operation, and its assets are being carried as assets held for
sale.
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 1996
was insufficient to cover the Harmal Division's operating expenses, resulting in
operating losses.
These operating losses prevented the Company from completing a
transaction to sell the Harmal Division. As a result, management developed a
plan to phase out this business, selling the division's assets on an orderly
basis to recover a portion of its investment in the division's operating assets.
The phase out of the Harmal Division's operations and sale of its assets is
expected to be virtually complete by June 30, 1997.
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The Company's management is actively pursuing the redeployment of the
Company's assets as a result of the progress made towards the phase out of
Harmal's operations and the sale of its assets and the final resolution of its
ongoing tax audit (see Note 5 to the financial statements herein).
As of December 31, 1996, the Company had 4 employees.
Item 2. Properties:
The Company's executive offices are located at 1411 Broadway, New York,
New York 10018. It 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 during 1995.
The Company owns approximately 164,000 square feet of manufacturing and
warehousing facilities in Mississippi. At December 31, 1995 and 1996 these
properties were carried as assets held for sale and the Company is currently
seeking to sell the properties.
Item 3. Legal proceedings:
There are no material pending legal proceedings involving the Company.
Item 4. Submission of matter to a vote of security holders:
No matter was submitted during the fourth quarter of 1996 to a vote of
the Company's shareholders.
3 OF 27 PAGES
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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
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 2 5/8 2
2nd quarter 2 3/8 1 7/8
3rd quarter 2 1/4 1 7/8
4th quarter 2 1 1/8
1997:
1st quarter
(to March 10, 1997) 1 5/8 1 1/4
As of March 10, 1997, there were approximately 461 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.
4 OF 27 PAGES
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Item 6. Selected financial data:
For the years ended December 31,
1996 1995 1994 1993 1992
(In thousands except per share amounts)
Net (loss) income from
continuing operations ($ 218) ($ 70) ($206) ($266) $ 338
(Loss) income from
discontinued
operations (792) (4,908) 435 427 (1,685)
Loss on disposal of
discontinued
operations (300) (1,861) - - -
Net (loss) income ($1,310) ($6,839) $229 $161 ($1,347)
====== ====== ==== ==== ======
Per share data:
Net (loss) income from
continuing operations ($.11) ($.03) ($.10) ($.13) $.16
(Loss) income from
discontinued
operations (.38) (2.39) .21 .21 (.81)
Loss on disposal of
discontinued
operations (.15) (.90) - - -
Net (loss) income ($.64) ($3.32) $.11 $.08 ($.65)
==== ===== ==== ==== ====
Weighted average shares and common stock equivalent shares outstanding:
Primary and fully diluted 2,058 2,058 2,067 2,058 2,058
Balance sheet:
Total assets $6,880 $9,115 $27,364 $25,498 $27,841
Long-term debt $ 0 $ 0 $ 1,581 $ 1,715 $ 1,896
See notes to consolidated financial statements.
5 OF 27 PAGES
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Item 7. Management's discussion and analysis of financial condition and
results of operations:
Liquidity and capital resources:
Working capital at December 31, 1996 was $4,736,000 as compared to
$6,046,000 at December 31, 1995. The decrease of $1,310,000 was due to the net
loss for the year.
Net accounts receivable were $41,000 at December 31, 1996 as compared to
$479,000 at December 31, 1995, a decrease of $438,000. The decrease was due to
the collection of most of the Company's accounts receivable.
Management believes that the Company's cash and cash equivalents at
December 31, 1996 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 Company's management is actively pursuing the redeployment of the
Company's assets as a result of the progress made toward the phase out of
Harmal's operations and the sale of its assets and the final resolution of its
ongoing tax audit (see Note 5 to the financial statements herein).
Results of operations:
1996 compared to 1995 -
Revenues in both 1996 and 1995 consisted of consulting and interest income.
Consulting income, which arises from the Company's agreement with a purchaser of
its former Sportswear Division, rose in 1996 as compared to 1995 due to the
agreement being in effect for twelve months in 1996 versus six months in 1995.
Interest income rose in 1996 versus 1995 because the Company generates interest
income on its net cash balances only, and during 1996 had a net cash balance for
twelve months as compared to 1995 when the Company did not generate a net cash
balance until July.
General and administrative expenses rose in 1996 compared to 1995 primarily
as a result of expenses which were no longer allocated to its discontinued
operations. During 1995, many of such expenses were allocated to the Company's
discontinued operations until the sale of the Sportswear Division as of June 30,
1995.
Provision for taxes for 1996 relative to 1995 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 1996 and 1995.
The decrease in losses from discontinued operations in 1996 compared to
1995 was primarily due to two factors. During 1996, the Company operated only
its Harmal Division, which continued to experience operating losses and which
caused a loss on the disposal of certain of this division's assets. During 1995,
the Company operated its Sportswear Division for only the first half of the
year, its seasonally weak period, and the Harmal Division had significantly
lower revenues than were necessary to achieve profitability. Additionally, in
1995, the Company suffered one-time losses relating to the disposal and
discontinuance of the Sportswear and Harmal Divisions.
6 OF 27 PAGES
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1995 compared to 1994 -
Revenues in 1995 consisted of consulting and interest income. The
consulting income arose from the Company's agreement with a purchaser of its
Sportswear Division and the interest income arose from the investment, in the
latter half of 1995, 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 was 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, in
1995 the Company suffered one-time losses relating to the disposal and
discontinuance of the Sportswear and Harmal Divisions.
7 OF 27 PAGES
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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, 1996 and 1995 10
Consolidated statements of operations for the years ended
December 31, 1996, 1995 and 1994 11
Consolidated statements of stockholders' equity for the years
ended December 31, 1996, 1995 and 1994 12
Consolidated statements of cash flows for the years ended
December 31, 1996, 1995 and 1994 13
Notes to consolidated financial statements 14-19
8 OF 27 PAGES
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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, 1996 and 1995 and the
results of their operations and their cash flows for each of the three years in
the period ended December 31, 1996 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.
PRICE WATERHOUSE LLP
New York, New York
March 20, 1997
9 OF 27 PAGES
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OAK HILL SPORTSWEAR CORPORATION
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
December 31,
1996 1995
Assets
Current assets:
Cash and cash equivalents $ 5,314 $ 5,823
Accounts receivable - net 41 479
Assets held for sale 1,428 2,654
Other current assets 97 159
------- -------
Total current assets $ 6,880 $ 9,115
======= =======
Liabilities and stockholders' equity
Current liabilities:
Current portion of long-term debt $ 500 $ 1,000
Accounts payable 71 33
Accrued expenses 1,072 1,514
Accrued income taxes 501 522
------- -------
Total current liabilities 2,144 3,069
------- -------
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) (5,716) (4,406)
Common stock held in treasury, at cost
(2,812,252 shares) (17,008) (17,008)
------- -------
Total stockholders' equity 4,736 6,046
------- -------
$ 6,880 $ 9,115
======= =======
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 6 1 9 9 5 1 9 9 4
Revenues $ 322 $ 159 $ 0
General and administrative
expenses 531 215 176
------- ------- -------
Loss from continuing operations
before provision for
taxes (209) (56) (176)
Provision for taxes 9 14 30
------- ------- -------
Loss from continuing
operations ( 218) (70) (206)
------- ------- ------
Discontinued operations:
(Loss) income, net ( 792) ( 4,908) 435
Loss on disposal, net ( 300) ( 1,861) -
------- ------- ------
( 1,092) ( 6,769) 435
------- ------- ------
Net (loss) income ($1,310) ($ 6,839) $ 229
======= ======= ======
Per share data:
Loss from continuing
operations ($.11) ($.03) ($.10)
------- ------- ------
Discontinued operations:
(Loss) income, net (.38) (2.39) .21
Loss on disposal, net (.15) (.90) -
------- ---- ----
(.53) (3.29) .21
------- ---- ----
Net (loss) income, primary
and fully diluted ($ .64) ($3.32) $.11
======= ===== ====
See notes to consolidated financial statements.
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OAK HILL SPORTSWEAR CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(In thousands)
<TABLE>
<CAPTION>
Retained Total
Common stock Capital in earnings stock-
Shares Par In excess of (accum. holders'
Issued Value treasury par value deficit) equity
<S> <C> <C> <C> <C> <C> <C>
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
Net loss for
the year ended
December 31, 1996 ( 1,310) ( 1,310)
----- --- -------- ------- ------ -------
Balance, December
31, 1996 4,870 $97 ($17,008) $27,363 ($5,716) $ 4,736
===== === ======== ======= ====== =======
</TABLE>
See notes to consolidated financial statements.
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OAK HILL SPORTSWEAR CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
Years ended December 31,
1996 1995 1994
<S> <C> <C> <C>
Cash flows from operating activities:
Net (loss) income ($ 1,310) ($6,839) $ 229
Adjustments to reconcile net (loss)
income to net cash provided
by operating activities:
Loss on disposal of disc. operations 300 1,861 -
Depreciation and amortization - 251 524
------- ------ -------
(1,010) (4,727) 753
Changes in assets and liabilities 75 2,984 (2,400)
------- ------ -------
Net cash (used in)
operating activities ( 935) (1,743) (1,647)
------- ------ -------
Cash flows from investing activities
Capital expenditures - - (194)
Net proceeds on disposal of
discontinued operations 926 15,168 -
------- ------ -------
Net cash provided by (used in)
investing activities 926 15,168 (194)
------- ------ -------
Cash flows from financing activities:
Net increase (reduction) in
short term borrowings - (7,199) 2,168
Principal payment of long-term debt (500) (735) (164)
------- ------ -------
Net cash (used in) provided by
financing activities (500) (7,934) 2,004
------- ------ -------
Net increase (decrease) in cash (509) 5,491 163
Cash at beginning of year 5,823 332 169
------- ------ -------
Cash at end of year $ 5,314 $5,823 $ 332
======= ====== =======
Supplemental disclosures of cash flow information:
Changes in assets and liabilities:
Accounts receivable $ 438 $9,144 ($ 629)
Inventories - (1,922) (670)
Other current assets 62 - (411)
Other assets - 308 (323)
Accounts payable and accrued expenses (404) (4,732) (365)
Accrued income taxes (21) 186 (2)
------- ------ -------
$ 75 $2,984 ($2,400)
======= ====== =======
Cash paid during the year for:
Interest $ 67 $1,073 $1,617
Income Taxes 30 24 32
</TABLE>
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 Company's consolidated financial statements have been prepared in
accordance with generally accepted accounting principles. 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 1996 presentation.
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.
C. 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.
D. Net income (loss) per share:
Primary and fully diluted net income (loss) per share for 1996 and 1995
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.
E. Revenues:
Consulting fees and interest income are recognized as earned. Interest
income for 1996, 1995 and 1994 was $247,000, $121,000 and $0, respectively.
F. 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 to determine the rights and preferences. The shares have not been issued and
the terms, rights and preferences have not been established.
G. 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.
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H. Use of estimates:
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.
NOTE 2 - ACCOUNTS RECEIVABLE:
Accounts receivable are net of allowances of $0 and $204,000 at December
31, 1996 and 1995, respectively.
NOTE 3 - LONG-TERM DEBT:
The Company has an outstanding mortgage note, which is secured by land and
buildings in Mississippi (and, from September 1995 through December 1996, by a
$1,000,000 certificate of deposit and, since December 1996, by a $500,000
certificate of deposit) which carries an interest rate of 5.01%. The principal
balance of the mortgage was $1,000,000 at December 31, 1995. During 1996,
$500,000 of the principal balance of the mortgage was paid. The Company has
classified this as a current liability as it is likely part or all of such note
will be repaid in 1997.
NOTE 4 - 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.
On April 22, 1996, the Board of Directors approved an amendment to the Plan,
which was also approved by a majority of shareholders at the Company's Annual
Meeting held on June 26, 1996. The amendment provides that the Plan is permitted
to grant options to non-employee directors and provides that each director who
is not an employee of the Company shall receive options to purchase 15,000
shares upon joining the Board.
At December 31, 1996, the Company reserved 199,250 shares of its Common
Stock for the purposes of the Plan. At that date, there were 184,000 options
outstanding at exercise prices of $2.00-$4.25.
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Additional information concerning stock options under the Plan is summarized
as follows:
1996 1995
Options outstanding at beginning of year 74,000 174,000
Options granted 110,000 -
Options canceled or surrendered - 100,000
Options exercised - -
------- -------
Options outstanding at end of year 184,000 74,000
======= =======
Options exercisable at end of year 37,000 18,500
======= =======
Options available for future grant 15,250 125,250
======= =======
As permitted, the Company applies Accounting Principles Board Opinion No. 25
and related interpretations in accounting for its stock-based compensation plan.
Had compensation cost for the Company's stock-based compensation plan been
determined based on the fair value at the grant dates for awards under the Plan,
consistent with the alternative method of Statement of Financial Accounting
Standards No. 123, Accounting for Stock-Based Compensation, the effect on the
Company's net loss for the years ended December 31, 1996 and 1995 would not have
been material.
NOTE 5 - TAXES:
Provision for taxes consists of the following components:
December 31,
1996 1995 1994
Current $9,000 $14,000 $30,000
Deferred - - -
------ ------- -------
Total $9,000 $14,000 $30,000
====== ======= =======
The provisions for 1996, 1995 and 1994 represent state and local taxes.
There is no provision for federal income taxes as the Company had net losses in
1996 and 1995 and utilized approximately $419,000 of its net operating loss
carryforward to offset approximately $142,000 of federal income taxes otherwise
payable in 1994. At December 31, 1996, the Company has available for Federal
income tax purposes net operating loss carryforwards of approximately
$11,243,000 that begin to expire in the year 2007.
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A reconciliation of the statutory income tax rate and the effective tax
rates for 1996, 1995 and 1994 follows:
1996 1995 1994
Statutory rate 34.0% 34.0% 34.0%
State and local taxes (.5) - 7.6
Amortization and other
non-deductible expenses (1.1) (.6) 21.0
Net operating loss carryforward - - (51.0)
Valuation allowance (33.1) (33.6) -
----- ----- -----
( .7%) ( .2%) 11.6%
====== ====== ======
The following summarizes the significant components of deferred tax
(liabilities) assets:
December 31, December 31,
1996 1995
Depreciation $ 0 $ (44,000)
---------- ----------
Gross deferred tax liabilities 0 (44,000)
---------- ----------
Accrued expenses 110,000 0
Inventory 17,000 17,000
Operating loss carryforward 3,822,000 1,776,000
Capital loss carryforward 121,000 0
Disposal of Harmal Division 0 755,000
---------- ----------
Gross deferred tax assets 4,070,000 2,548,000
---------- ----------
Deferred tax asset valuation
allowance 4,070,000 2,504,000
---------- ----------
Deferred Taxes $ 0 $ 0
========== ==========
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 issued a "30 day letter," assessing a claim of
approximately $1,400,000, including interest. The Company, believing it had
meritorious defenses against such assessment, filed an appeal. Subsequent to
year end, in February 1997, the Company and the IRS reached a tentative
settlement which would result in the payment of approximately $550,000 in tax
and interest. The major issue of dispute in the audit process was the timing of
a particular deduction relating to inventory. Although the settlement includes a
disallowance of a portion of the Company's inventory deduction in the particular
year taken, the Company is entitled to the deduction in a subsequent tax year.
The Company is awaiting the confirmation of the settlement by the Joint
Committee on Taxation in Washington, D.C. The ultimate resolution of the matter
could differ in the near term from the amounts accrued.
NOTE 6 - 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 $7,500 in 1996, $93,000 in 1995 and $137,000 in 1994.
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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 $37,000 in 1996, $91,000 in 1995 and $180,000 in 1994.
NOTE 7 - ACCRUED EXPENSES:
Accrued expenses at December 31 consist of:
1 9 9 6 1 9 9 5
Pension and profit-sharing plans $ 20,000 $ 198,000
Accrual related to
discontinued operations 1,033,000 1,190,000
Other 19,000 126,000
---------- ----------
$1,072,000 $1,514,000
========== ==========
NOTE 8 - 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.
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
18 OF 27 PAGES
<PAGE>
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 and 1996, the Harmal Division is being treated
as a discontinued operation and its assets are being carried as assets held for
sale.
Harmal's reduced sales level during 1996 was insufficient to cover its
operating expenses, resulting in significant operating losses. These operating
losses prevented the Company from completing a transaction to sell the Harmal
Division. As a result, Management undertook a plan to phase out this business
and sell Harmal's assets on an orderly basis to recoup a portion of the
Company's investment in the Division's operating assets. As of December 31,
1996, the Company is in the late stages of completing the phase out of the
Harmal Division's business and the sale of its assets, which are expected to be
virtually complete by June 30, 1997.
Sales made by the Company's Sportswear Division (until its sale as of June
30, 1995) and Harmal Division in the aggregate in 1996 and 1995 were $3,697,000
and $35,086,000, respectively.
19 OF 27 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.
20 OF 27 PAGES
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K:
<TABLE>
<CAPTION>
<S> <C>
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, 1996, 1995 and 1994:
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, as amended. Exhibit 3.1 to the
as amended. Company's 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.
</TABLE>
21 OF 27 PAGES
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Filed herewith or
incorporated by
reference to:
10. Material Contracts.
(d) Profit-sharing and Pension Plans, as amended. Exhibit to Registra-
tion 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
Plan. the 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
July 15, 1992. year ended December 31,
1992.
(2) Land Deed of Trust to Exhibit 10(g)(2) to
Deposit Guaranty National the Company's Form
Bank dated July 15, 1992. 10-K for 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
between Oak Hill Sportswear Company's
Corporation and Donnkenny Proxy Statement dated
Apparel, Inc. dated as June 28, 1995.
of May 23, 1995.
(2) Amendment No. 1 to Asset Annex A to the
Purchase Agreement Company's
between Oak Hill Proxy Statement dated
Sportswear Corporation June 28, 1995.
and Donnkenny Apparel, Inc.
dated as of June 26, 1995.
</TABLE>
22 OF 27 PAGES
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Filed herewith or
incorporated by
reference to:
(24) (i) Consent of Price Waterhouse. Exhibit 24(i) filed
herewith.
</TABLE>
(b) No report on Form 8-K was filed by the Company during the fourth quarter
of its fiscal year ending December 31, 1996.
(c) See Item 14(a)(3) above.
(d) See Item 14(a)(2) above.
23 OF 27 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 20, 1997 appearing on page 9 of the 1996 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 20, 1997
24 OF 27 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, 1996 $204 $ 0 $ 0 $ 204 $ 0
==== ==== ====== ====== ====
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
==== ==== ====== ====== ====
(a) Offset against sales.
25 OF 27 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, President and Treasurer (Principal financial officer)
Date: March 26, 1997
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/ Michael A. Asch
- ------------------------------------- -----------------------------------
Arthur L. Asch, Director Michael A. Asch, Director
Date: March 26, 1997 Date: March 26, 1997
/s/ Kenneth S. Roth /s/ Joseph Greenberger
- ------------------------------------- -----------------------------------
Kenneth S. Roth, Director Joseph Greenberger, Director
Date: March 26, 1997 Date: March 26, 1997
/s/ Aaron W. Weingarten
- -------------------------------------
Aaron W. Weingarten, Director
Date: March 26, 1997
26 OF 27 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 20,
1997 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 24 of this Form 10-K.
PRICE WATERHOUSE LLP
New York, New York
March 20, 1997
27 OF 27 PAGES
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 5,314
<SECURITIES> 0
<RECEIVABLES> 41
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 6,880
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 6,880
<CURRENT-LIABILITIES> 2,144
<BONDS> 0
0
0
<COMMON> 4,736
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 6,880
<SALES> 0
<TOTAL-REVENUES> 322
<CGS> 0
<TOTAL-COSTS> 531
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (209)
<INCOME-TAX> 9
<INCOME-CONTINUING> (218)
<DISCONTINUED> (1,092)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,310)
<EPS-PRIMARY> (.64)
<EPS-DILUTED> (.64)
</TABLE>
