<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------
FORM 8-K/A
(Amendment No. 1)
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) October 21, 1997
----------------
OAK HILL SPORTSWEAR CORPORATION
--------------------------------------------------
(Exact name of registrant as specified in charter)
New York 0-5613 13-2625545
- --------------- ----------- -------------------
(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification No.)
incorporation)
1411 Broadway New York, New York 10018
- --------------------------------------------------------------------------------
(Address of principal executive offices) (zip code)
Registrant's telephone number, including area code 212 789-8900
------------
Page 1 of 28 Pages
<PAGE>
Oak Hill Sportswear Corporation hereby amends its report on
Form 8-K, dated October 30, 1997, by filing herewith financial statements, pro
forma financial information and exhibits in connection with its acquisition of
all the outstanding shares of Watkins Contracting, Inc., as reported on said
Form 8-K.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(a) Financial statements of the business acquired
Watkins Contracting Inc. Interim Financial Statements:
Review Report of Schilling and Hinzman, Certified Public Accountants
Unaudited Balance Sheet as of September 30, 1997
Unaudited Statement of Income for the three months ended
September 30, 1997.
Unaudited Statement of Cash Flows for the three months ended
September 30, 1997
Notes to Unaudited Financial Statements
(b) Pro forma financial information
Statement regarding unaudited pro forma financial information
Unaudited Pro Forma Consolidated Balance Sheet as of September 30,
1997
Notes to Unaudited Consolidated Pro Forma Balance Sheet
Unaudited Pro Forma Consolidated Statement of Operations for the nine
months ended September 30, 1997
Unaudited Pro Forma Consolidated Statement of Operations for the year
ended December 31, 1996
Notes to Unaudited Pro Forma Consolidated Statements of Operations
Page 2 of 28 Pages
<PAGE>
(c) Exhibits This
filing
pages:
Exhibit 23.1 Consent of Schilling and Hinzman, 5-6
Certified Public Accountants
Exhibit 99.1a Financial Statements of the Business 7-22
Acquired: Watkins Contracting Inc.
Interim Financial Statements - Review
Report of Schilling and Hinzman,
Certified Public Accountants; Unaudited
Balance Sheet as of September 30, 1997;
Unaudited Statement of Income for the
three months ended September 30, 1997;
Unaudited Statement of Cash Flows for
the three months ended September 30,
1997; and Notes to Unaudited Financial
Statements
Exhibit 99.2 Pro Forma financial information: 23-28
Statement regarding unaudited pro forma
financial information; Unaudited Pro
Forma Consolidated Balance Sheet as of
September 30, 1997; Notes to Unaudited
Consolidated Pro Forma Balance Sheet;
Unaudited Pro Forma Consolidated
Statement of Operations for the nine
months ended September 30, 1997;
Unaudited Pro Forma Consolidated
Statement of Operations for the year
ended December 31, 1996; and Notes to
Unaudited Pro Forma Consolidated
Statements of Operations;
Page 3 of 28 Pages
<PAGE>
SIGNATURE
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.
Dated: December 31, 1997
OAK HILL SPORTSWEAR CORPORATION
(Registrant)
By: /s/ Arthur L. Asch
---------------------------------------
Arthur L. Asch,
Chairman of the Board
<PAGE>
SCHILLING & HINZMAN
-------------------
Certified Public Accountants
6339 Nancy Ridge Drive, Suite 200
San Diego, CA 92121
Phone: (619) 535-1600
Fax: (619) 535-1649
December 17, 1997
Mr. Arthur Asch
Oak Hill Sportswear Corporation
1411 Broadway
New York, NY 10018
Dear Arthur:
We hereby consent to your use of our audited financial statements of Watkins
Contracting, Inc. for the years ended June 30, 1997 and 1996 and the reviewed
financial statements as of September 30, 1997 in connection with your filings
with the Securities and Exchange Commission.
/s/ SCHILLING & HINZMAN
- -------------------------------
Schilling & Hinzman
Certified Public Accountants
<PAGE>
WATKINS CONTRACTING, INC.
FINANCIAL STATEMENTS AND
ACCOUNTANTS' REVIEW REPORT
For The Three Months Ended
September 30, 1997
<PAGE>
WATKINS CONTRACTING, INC.
TABLE OF CONTENTS
================================================================================
Page
----
Accountants' Review Report ............................................... 1
Financial Statements
Balance Sheet ................................................... 2
Statement of Income .............................................. 3
Statement of Cash Flows ......................................... 4
Notes to Financial Statements ................................... 5
<PAGE>
SCHILLING & HINZMAN
-------------------
Certified Public Accountants
6339 Nancy Ridge Drive, Suite 200
San Diego, CA 92121
Phone: (619) 535-1600
Fax: (619) 535-1649
ACCOUNTANTS' REVIEW REPORT
October 29, 1997
Board of Directors
Watkins Contracting, Inc.
San Diego, California
We have reviewed the accompanying balance sheet of Watkins Contracting, Inc.
as of September 30, 1997 and the related statements of income and cash flows
for the three months then ended, in accordance with Statements on Standards
for Accounting and Review Services issued by the American Institute of
Certified Public Accountants. All information included in these financial
statements is the representation of the management of Watkins Contracting,
Inc.
A review consists principally of inquiries of Company personnel and analytical
procedures applied to financial data. It is substantially less in scope than
an audit in accordance with generally accepted auditing standards, the
objective of which is the expression of an opinion regarding the financial
statements taken as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that
should be made to the accompanying financial statements in order for them to
be in conformity with generally accepted accounting principles.
/s/ SCHILLING & HINZMAN
- -----------------------------
SCHILLING & HINZMAN
Certified Public Accountants
- --------------------------------------------------------------------------------
Page 1
<PAGE>
WATKINS CONTRACTING, INC.
Balance Sheet
September 30, 1997
ASSETS
Current assets
Cash $ 4,093
Contract receivables, net of allowance 1,990,001
Costs and estimated earnings in excess
of billings on contracts in progress 536,433
Prepaid expenses 42,777
Due from related parties 66,908
Land held for sale 569,808
----------
Total current assets 3,210,020
Property and equipment, net 464,733
Other assets
Non-competition agreement 58,330
Deposits 4,000
----------
$3,737,083
==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $1,069,241
Current portion of long-term debt 78,616
Billings in excess of costs and estimated
earnings on contracts in progress 215,238
Accrued expenses 252,341
Income taxes payable 383,041
Deferred income taxes 38,296
Debt on land held for sale 420,505
----------
Total current liabilities 2,457,278
----------
Deferred income, non-competition agreement 65,000
----------
Long-term debt, net of current portion 52,541
----------
Stockholders' equity
Common stock - no par value; 2,500 shares authorized,
2 shares issued and outstanding 1,000
Retained earnings 1,161,264
----------
Total stockholders' equity 1,162,264
----------
$3,737,083
==========
- -------------------------------------------------------------------------------
See accompanying accountants's review report and notes to financial statements
Page 2
<PAGE>
WATKINS CONTRACTING, INC.
Statement of Income
For the three months ended September 30, 1997
Contract revenue $2,581,714
Cost of construction 1,502,071
----------
Gross profit 1,079,643
Operating expenses 646,991
----------
Income from operations 432,652
----------
Other income (expense)
Interest income 298
Interest expense (15,357)
Non-competition agreement income 15,000
Reimbursement of loan payments 23,647
----------
23,588
----------
Income before income taxes 456,240
Income tax expense 178,368
----------
Net income 277,872
Retained earnings, beginning of year 883,392
----------
Retained earnings, end of year $1,161,264
==========
See accompanying accountants's review report and notes to financial statements
Page 3
<PAGE>
WATKINS CONTRACTING, INC.
Statement of Cash Flows
For the three months ended September 30, 1997
Cash flows from operating activities
Net income $ 277,872
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation 34,449
Changes in operating assets and liabilities:
Contract receivables (532,219)
Costs and estimated earnings in excess
of billings on contracts in progress (403,277)
Prepaid expenses and other assets 20,318
Increase in deposits (1,000)
Accounts payable 490,735
Billings in excess of costs and
estimated earnings on contracts in progress 9,765
Accrued expenses 79,512
Income taxes payable 59,000
Deferred income taxes (30,632)
----------
Net cash provided by operating activities 4,523
----------
Cash flows from investing activities
Purchase of property and equipment (5,000)
----------
Net cash used in investing activities (5,000)
----------
Cash flows from financing activities
Payments on long-term borrowings (29,191)
Repayments of advances to related parties 56,000
New advances to related parties (18,545)
Amortization of noncompetition agreement - Watkins 5,000
Amortization of noncompetition agreement - Vegas (15,000)
----------
Net cash used in financing activities (1,736)
----------
Net increase (decrease) in cash (2,213)
Cash, beginning of year 6,306
----------
Cash, end of year $ 4,093
=========
See accompanying accountants's review report and notes to financial statements
Page 4
<PAGE>
WATKINS CONTRACTING, INC.
Notes to Financial Statements
September 30, 1997
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
- ------------
Watkins Contracting, Inc. (the "Company"), a Nevada corporation incorporated
in June 1991, is a general contractor and a subcontractor performing work in
asbestos removal, lead abatement and demolition primarily in the Southern
California area.
METHOD OF INCOME RECOGNITION
- ----------------------------
The percentage-of-completion method of accounting for construction contracts
is used in the financial statements. Under this method, revenues and related
income are recognized as the work on the contract progresses. Generally, such
income represents the percentage of estimated total income that costs incurred
to date bear to estimated total costs. When current estimates of total
contract costs indicate a loss on a contract, provision is made in the
financial statements for the entire estimated amount of the loss. Changes in
job performance, job conditions and estimated profitability, including these
arising from contract penalty provisions, and final contract settlements may
result in revisions to cost and income and are recognized in the period in
which the revisions are determined.
Contract costs include all direct material and labor costs and those indirect
costs related to contract performance such as indirect labor, supplies, tools
and repairs. Selling, general and administrative costs are charged to expense
as incurred.
Amounts earned on specific projects in excess of billings are treated as a
current asset and billings in excess of earnings are treated as a current
liability.
CONTRACT RECEIVABLES
- --------------------
The Company uses the reserve method for uncollectible accounts, the allowance
for doubtful accounts totaled $34,500 at September 30, 1997.
INCOME TAXES
- ------------
The Company used the cash basis method of reporting for income tax purposes
until June 30, 1995, under which revenues and expenses were recognized in the
accounting period in which they were received and paid. The Company converted
to the percentage of completion method of reporting for income tax purposes
effective July 1, 1995.
- ------------------------------------------------------------------------------
See accompanying accountants' review report Page 5
<PAGE>
WATKINS CONTRACTING, INC.
Notes to Financial Statements
September 30, 1997
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
INCOME TAXES (Continued)
- ------------
Current income tax expense is the amount of income taxes expected to be
payable for the current year. A deferred income tax asset or liability is
computed for the expected future impact of differences between the financial
reporting and tax basis of assets and liabilities. Valuation allowances are
established, when necessary, to reduce deferred tax assets to the amount "more
likely than not" to be realized in future tax returns. Tax rate changes are
reflected in income during the period such changes are enacted.
ESTIMATES
- ---------
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect certain reported amounts and disclosures. Accordingly, actual
results could differ from those estimates.
CASH AND CASH EQUIVALENTS
- -------------------------
The Company considers all highly liquid debt instruments purchased with a
maturity of three months or less to be cash equivalents.
PROPERTY AND EQUIPMENT
- ----------------------
Property and equipment is carried at cost and depreciated using the straight
line method over the estimated useful lives of the individual assets,
generally three to ten years for all assets.
NON-COMPETITION AGREEMENT
- -------------------------
In connection with a stock redemption agreement, the Company recorded an
intangible asset totaling $100,000 at September 19, 1995. This intangible
asset is being amortized on a straight line basis over its five year term.
Non-competition agreement expense totaled $5,000 for the three months ended
September 30, 1997.
- -------------------------------------------------------------------------------
See accompanying accountants' review report Page 6
<PAGE>
WATKINS CONTRACTING, INC.
Notes to Financial Statements
September 30, 1997
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
DEFERRED INCOME, NON-COMPETITION AGREEMENT
- ------------------------------------------
In connection with the sale of its Las Vegas division, the Company recorded
deferred income totaling $180,000 at November 1, 1995. Deferred income is
being amortized on a straight line basis over its three year term.
Non-competition agreement income totaled $15,000 for the three months ended
September 30, 1997.
2. CONTRACTS IN PROGRESS
Contracts in progress at September 30, 1997 are as follows:
Costs incurred on contracts in progress $ 1,946,035
Estimated earnings on contracts in progress 2,496,700
------------
Total cost and estimated earnings 4,442,735
Less billings to date (4,121,540)
------------
$ 321,195
============
Contracts in progress are included in
the accompanying balance sheet
under the following headings:
Costs and estimated earnings in excess of
billings on contracts in progress $ 536,433
Billings in excess of costs and estimated
earnings on contracts in progress (215,238)
------------
$ 321,195
============
- --------------------------------------------------------------------------------
See accompanying accountants' review report Page 7
<PAGE>
WATKINS CONTRACTING, INC.
Notes to Financial Statements
September 30, 1997
3. CONTRACT RECEIVABLES
Contract receivables at September 30, 1997 includes:
Contracts in progress:
Currently receivable $ 967,836
Unbilled retentions 234,008
-----------
1,201,844
-----------
Completed contracts:
Currently receivable 640,844
Retentions receivable 181,813
-----------
822,657
Less allowance for doubtful accounts (34,500)
------------
$ 1,990,001
===========
4. TRANSACTIONS WITH RELATED PARTIES
The Company made loans to Wayne Watkins, the father of a principal
stockholder, totaling $200,000 on July 23, 1997 and $300,000 on August 19,
1997. Mr. Watkins repaid these loans on August 4, 1997 and September 5, 1997,
respectively. Interest was charged on these loans at the same rate as the
Company's line of credit.
In addition, the Company advanced various amounts to its two officers and
principal stockholders. A total of $56,000 was repaid by the shareholders
during the three months ended September 30, 1997. No interest was charged on
these advances, which totaled $48,363 at September 30, 1997. The advances
contain no repayment terms or dates.
The Company is leasing a vacant lot for storage from a company owned by the
Company's stockholders. The lease, effective June 15, 1997, calls for monthly
payments of $2,000, is cancelable with 90 day written notice and has no
expiration date. A total of $6,000 was paid under this lease for the three
months ended September 30, 1997.
The Company also purchases all of its insurance policies, including general
liability, vehicle and workers compensation, from Front Line Insurance, which
is partially owned by the wife of one of the Company's stockholders. Front
Line is an insurance broker; the actual insurance policies are issued by
various independent insurance companies. Premiums for insurance policies
handled by Front Line totaled $28,867 for the three months ended September 30,
1997.
- --------------------------------------------------------------------------------
See accompanying accountants' review report Page 8
<PAGE>
WATKINS CONTRACTING, INC.
Notes to Financial Statements
September 30, 1997
5. LAND HELD FOR SALE
During December 1996, the Company acquired land in Arizona for a $129,808 down
payment and proceeds of $440,000 from a United States Small Business
Administration ("SBA") loan. Subsequently, the Company agreed to sell the land
to Envira Minerals, Inc. ("Envira") for the same price. The Company's
stockholders are also minority stockholders in Envira. Envira is currently in
the process of obtaining financing for this land. Until this financing is
arranged, Envira has agreed to reimburse the Company for all monthly payments
due under the SBA loan. Envira paid $5,815 during the three months ended
September 30, 1997 and an additional $17,832 was accrued as Due from Related
Parties; the total $23,647 has been included with other income in the income
statement. The land and related loan have been classified as a current asset
and liability on the balance sheet at September 30, 1997.
6. PROPERTY AND EQUIPMENT
Property and equipment at September 30, 1997 includes:
Machinery and equipment $ 295,984
Office equipment 158,888
Furniture and fixtures 13,775
Leasehold improvements 63,853
Vehicles 335,029
-----------
867,529
Less accumulated depreciation (402,796)
-----------
Net property and equipment $ 464,733
===========
7. LONG-TERM DEBT
The Company acquired vehicles and equipment under long-term purchase contracts
which were secured by the related assets. Fixed assets under purchase
contracts had a total net book value of $167,250 at September 30, 1997. The
Company also acquired equipment under the provisions of three long-term
leases. For financial reporting purposes, minimum lease payments relating to
the equipment have been capitalized. One lease expired in July 1997, the two
others in December 1998. Leased equipment under capital lease had a cost of
$124,091, accumulated amortization of $25,256 and a net book value of $98,835
at September 30, 1997. Amortization of the leased equipment is included in
depreciation expense.
- --------------------------------------------------------------------------------
See accompanying accountants' review report Page 9
<PAGE>
WATKINS CONTRACTING, INC.
Notes to Financial Statements
September 30, 1997
7. LONG-TERM DEBT (Continued)
Long-term debt at September 30, 1997 included:
<TABLE>
<CAPTION>
Monthly Interest Maturity
Description Payment Rate Date Balance
- ----------------------------- ------------------- ---------------- ---------------- --------------
<S> <C> <C> <C> <C>
Purchase Contracts:
F350 $ 620 7.9% 4/99 $ 11,578
Bobcat Loader 1,189 9.5% 7/99 22,898
95 Taurus 410 11.7% 4/00 10,924
Bobcat Melroe 1,262 9.5% 4/99 22,200
97 Expedition 964 9.5% 5/00 27,790
97 F150 604 9.0% 9/00 18,461
-------------
Total purchase contracts 113,851
-------------
Capitalized leases:
Total minimum lease payments 18,350
Less amounts representing interest (1,044)
-------------
Present value of minimum lease payments 17,306
-------------
Total long-term debt and capitalized leases 131,157
Less current portion of long-term debt (78,616)
-------------
Long-term debt, net of current portion $ 52,541
=============
Maturities on long-term debt and capitalized leases:
Year ended June 30, 1998 $ 57,739
1999 53,111
2000 20,307
-------------
Total maturities $ 131,157
=========
</TABLE>
8. LINES OF CREDIT
At September 30, 1997, the Company had two open bank lines of credit. The
operating line of credit, totaling $312,000, has a variable interest rate at
3/4% over the bank's prime rate and is currently 9%. The equipment line of
credit, totaling $200,000, contains a fixed or variable interest rate option
available at the time of any advance. The fixed rate is 4 1/4% over the
Treasury rate and the variable rate is 1.8% over the bank's prime rate. Both
lines of credit are secured by the Company's assets and personally guaranteed
by both of the Company's stockholders. Neither line of credit had an
outstanding balance at September 30, 1997.
- -------------------------------------------------------------------------------
See accompanying accountants' review report Page 10
<PAGE>
WATKINS CONTRACTING, INC.
Notes to Financial Statements
September 30, 1997
9. INCOME TAXES
Deferred income taxes result from the temporary differences between the tax
basis of an asset or a liability and its reported amount in the balance sheet.
The types of temporary differences that give rise to significant portions of
deferred taxes are accrual to cash adjustments, depreciation and state taxes.
The Company's net deferred tax liability at September 30, 1997 consisted of
the following:
Federal $ 28,838
State 9,458
---------
Total deferred taxes $ 38,296
=========
The provision (benefit) for income taxes consisted of:
Current
Federal $ 159,000
State 50,000
----------
209,000
----------
Deferred
Federal (22,521)
State (8,111)
----------
(30,632)
----------
Total income tax expense $ 178,368
==========
The actual income tax rate differs from statutory rates as a result of
non-deductible expenses, the effect of graduated rates, franchise taxes, and
the impact of deferred tax items turning around in periods in which tax rates
differed from those at which deferred taxes were provided.
10. OPERATING LEASES
The Company's amended lease agreement for its San Diego office space expires
April 30, 1999. The monthly lease payment is currently $3,645 and will
increase to $5,506 on October 1, 1997 and $5,958 on May 1, 1998.
The Company is obligated under a noncancelable vehicle operating lease which
expires in May 2000. The lease payment for this vehicle is $697 per month.
- -------------------------------------------------------------------------------
See accompanying accountants' review report Page 11
<PAGE>
WATKINS CONTRACTING, INC.
Notes to Financial Statements
September 30, 1997
10. OPERATING LEASES (Continued)
Total rent expense for all operating leases for the three months ended
September 30, 1997 was $18,860.
Future minimum lease payments under noncancelable operating leases for the
years ended June 30 are as follows:
1998 $ 69,757
1999 67,944
2000 6,970
---------
$ 144,671
=========
11. PROFIT SHARING PLAN
The Company adopted a 401(k) profit sharing plan ("the Plan") on July 2, 1992.
Employees become eligible to participate in the Plan after six months of
service and having reached the age of 21 years. Participation by the employee
is at the employee's option. The Company's match of the employee's
contributions equals 25% of each participant's salary reduction agreement not
to exceed 6% of the participant's compensation. The Company may also make
discretionary contributions to the Plan for the benefit of the employees.
Employees are 100% vested in their employee contributions and begin vesting at
20% in the Company's contributions starting with their first year of service.
Their vesting portion increases by 20% per year of service until the fifth
year of service when the employee is 100% vested in the employer
contributions. Employer contributions for the three months ended September 30,
1997 were $1,743. Voluntary employee contributions into the plan for the three
months ended September 30, 1997 were $4,513.
12. SUPPLEMENTAL CASH FLOW INFORMATION
For the three months ended September 30, 1997, the Company paid interest of
$15,357 and income taxes of $150,000. The Company also purchased property and
equipment totaling $18,924 in exchange for notes payable.
- -------------------------------------------------------------------------------
See accompanying accountants' review report Page 12
<PAGE>
WATKINS CONTRACTING, INC.
Notes to Financial Statements
September 30, 1997
13. CONCENTRATION OF CREDIT RISK
The Company's construction projects are located in the southern California
area. The Company extends credit to customers, primarily general contractors
for military installations. Most contracts are secured by construction liens.
The Company maintains its cash in bank deposit accounts which, at times, may
exceed federally insured limits. The Company has not experienced any losses in
such accounts. The Company believes it is not exposed to any significant
credit risk on cash and cash equivalents.
14. SUBSEQUENT EVENT
On October 22, 1997, all of the Company's outstanding shares of stock were
acquired by Oak Hill Sportswear Corporation ("Oak Hill"). The Company will
operate as a subsidiary of Oak Hill, as such the Company's financial
statements will be consolidated with those of Oak Hill for financial reporting
and federal income tax purposes. Oak Hill is a publicly traded company based
in New York.
- -------------------------------------------------------------------------------
See accompanying accountants' review report Page 13
<PAGE>
OAK HILL SPORTSWEAR CORPORATION
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
The following unaudited pro forma financial statements give effect to the
acquisition by Oak Hill Sportswear Corporation ("Oak Hill") of Watkins
Contracting, Inc. ("WCI") in a transaction to be accounted for as a purchase.
The unaudited pro forma balance sheet is based on the individual consolidated
balance sheets of Oak Hill and WCI as of September 30, 1997 and has been
prepared to give effect to the acquisition as if it occurred on September 30,
1997. The unaudited pro forma consolidated statements of operations are based
on the individual consolidated statements of operations of Oak Hill and WCI for
the nine months ended September 30, 1997 and the year ended December 31, 1996.
The results of Oak Hill and WCI have been combined to give effect to the
acquisition as if it occurred at the beginning of each period presented.
The unaudited pro forma consolidated information is based upon preliminary
fair value allocations relative to the purchase of WCI. The final allocation
of the purchase may vary as additional information is obtained and,
accordingly, the ultimate allocations may differ from the allocations used in
the unaudited pro forma consolidated financial statements.
The unaudited pro forma consolidated financial information presented is not
necessarily indicative of the operating results that would have been reported
had the acquisition actually occurred on the dates indicated or which may be
obtained in the future. The pro forma financial statements should be read in
conjunction with the audited financial statements and the related notes
thereto of WCI appearing in Oak Hill's previously filed report on Form 8-K and
the historical financial statements, related notes and "Management's
Discussion and Analysis of Financial Condition and Results of Operations" of
Oak Hill for the year ended December 31, 1996 and the nine months ended
September 30, 1997, previously filed with the Securities and Exchange
Commission.
<PAGE>
OAK HILL SPORTSWEAR CORPORATION
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF SEPTEMBER 30, 1997
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
Pro Forma Adjustments Pro Forma
Oak Hill WCI Debit Credit Consolidated
------------ -------- -------- ------------ ------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Assets
Current Assets:
Cash and cash equivalents $4,500 $4 (a) $3,950 $554
Accounts receivable - net 8 1,990 1,998
Costs & estimated earnings in excess
of billings on contracts in progress 536 (b) 145 681
Due from related parties 67 67
Assets held for sale 834 570 1,404
Other current assets 106 43 149
------- ------- ------- ------- -------
Total current assets 5,448 3,210 145 3,950 4,853
Property and equipment, net 465 465
Goodwill (c) 3,155 3,155
Other assets 62 62
------- ------- ------- ------- -------
$5,448 $3,737 $3,300 $3,950 $8,535
======= ======= ======= ======= =======
Liabilities & Stockholders' Equity
Current Liabilities:
Current portion of long-term debt $500 $79 $579
Accounts payable 27 1,069 1,096
Accrued expenses 390 252 642
Billings in excess of costs and estimated
earnings on contracts in progress 215 215
Income taxes payable 148 383 531
Deferred income taxes 38 (d) 38
Debt on asset held for sale 421 421
------- ------- ------- ------- -------
Total current liabilities 1,065 2,457 38 3,484
------- ------- ------- ------- -------
Deferred income, non-competition
agreement 65 65
Long-term debt, net of current portion 53 53
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 (5,269,828 pro forma) 97 1 (e) 1 (f) 8 105
Capital in excess of par 27,363 (f) 542 27,905
Retained earnings (6,069) 1,161 (e) 1,161 (6,069)
Common stock held in treasury, at
cost (2,812,252 shares) (17,008) (17,008)
------- ------- ------- ------- -------
Total stockholders' equity 4,383 1,162 1,162 550 4,933
------- ------- ------- ------- -------
$5,448 $3,737 $1,200 $550 $8,535
======= ======= ======= ======= =======
</TABLE>
<PAGE>
OAK HILL SPORTSWEAR CORPORATION
NOTES TO UNAUDITED CONSOLIDATED PRO FORMA BALANCE SHEET
(a) Consists of $3,600 portion of the total purchase price of $4,150 paid to
the sellers and $350 of transaction related expenses.
(b) Portion of purchase price allocated to contracts in progress.
(c) Goodwill equal to (i) purchase price of $4,150 ($3,600 cash plus 400,000
shares valued at $550), plus (ii) estimated transaction expenses of $350, less
(iii) $1,162, the net book value of the assets acquired, less (iv) $145, the
amount of the purchase price allocated to contracts in progress, less (v) $38,
the reduction of deferred tax liability.
(d) Deferred tax liability is reduced to zero in purchase accounting, due to the
anticipated utilization of Oak Hill's net operating loss carryforwards.
(e) Eliminate WCI's historical equity.
(f) Represents issuance of 400,000 shares of common stock valued at $550 on the
date of acquisition to the former owners of WCI as part of the purchase price
in acquiring WCI.
<PAGE>
OAK HILL SPORTSWEAR CORPORATION
UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
For the Nine Months Ended September 30, 1997
---------------------------------------------------
Pro Forma Adjustments Pro Forma
Oak Hill WCI Debit Credit Consolidated
------------ ---------- ---------- ---------- --------------
<S> <C> <C> <C> <C> <C>
Revenues $199 $7,736 (a) $138 $7,797
Cost of construction 4,425 (b) 145 4,570
------------ ---------- -------- -------- -------------
Gross profit 199 3,311 283 3,227
General & administrative expenses 540 2,634 (c) 158 (d) 1,069 2,263
------------ ---------- -------- -------- -------------
(Loss) income from operations (341) 677 441 1,069 964
Other income (expense) 38 38
------------ ---------- -------- -------- -------------
(Loss) income before income taxes (341) 715 441 1,069 1,002
Provision for income taxes 12 283 (e) 174 121
------------ ---------- -------- -------- -------------
Net (loss) income ($353) $432 $441 $1,243 $881
------------ ---------- -------- -------- -------------
Per share data:
Primary and fully diluted ($0.17) $0.36
============ ==============
Weighted average number of
shares outstanding 2,058 (f) 2,458
============ ==============
For the Year Ended December 31, 1996
------------------------------------------------------
Pro Forma Adjustments Pro Forma
Oak Hill WCI Debit Credit Consolidated
------------ ---------- ------- --------- -------------
Revenues $322 $6,772 (a) $175 $6,919
Cost of construction 3,936 (b) 145 4,081
------------ ---------- ------- ------- -----------
Gross profit 322 2,836 320 2,838
General & administrative expenses 531 2,685 (c) 210 (d) 1,151 2,275
------------ ---------- ------- ------- -----------
(Loss) income from operations (209) 151 530 1,151 563
Other income (expense) 47 47
------------ ---------- ------- ------- -----------
(Loss) income before income taxes (209) 198 530 1,151 610
Provision for income taxes 9 80 (e) 4 85
------------ ---------- ------- ------- -----------
Net (loss) income ($218) $118 $530 $1,155 $525
------------ ---------- ------- ------- -----------
Per share data:
Primary and fully diluted ($0.11) $0.21
============ ===========
Weighted average number of
shares outstanding 2,058 (f) 2,458
============ ===========
</TABLE>
<PAGE>
OAK HILL SPORTSWEAR CORPORATION
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
(a) Eliminates interest income relating to a reduction of $3,950 in total cash
balances during each period.
(b) Amortization of portion of purchase price allocated to contracts in
progress over the remaining terms of such contracts.
(c) Amortization of goodwill over an estimated 15 year term on a straight line
basis.
(d) Elimination of a portion of compensation paid to the former owners of WCI
in excess of the contractual rates at which they will be compensated
subsequent to the acquisition. In connection with the acquisition, the two
former owners of WCI entered into employment agreements with WCI providing for
annual salaries of $180,000 per executive.
(e) Adjusts income taxes to be the sum of (i) Oak Hill's state and local
income taxes and (ii) California income taxes at the rate of 9.3% of
consolidated pre-tax income before goodwill amortization. Federal taxes have
been eliminated due to the anticipated utilization of Oak Hill's net operating
loss carryforwards.
(f) Reflects the issuance of 400,000 shares of common stock as a part of the
purchase price in the acquisition of WCI.
