<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QA
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1996
------------------
OR
[X]TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from December 3,1995 to December 31,1995
--------------- ----------------
Commission file number 0-21940
-------
Donnkenny, Inc.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 51-022889
------------------------------- ----------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1411 Broadway, New York, NY 10018
------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (212) 730-7770
--------------
NOT APPLICABLE
----------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report.)
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), Yes _X_ No ___ and (2) has
been subject to such filing requirements for the past 90 days. Yes X No .
--- ---
Indicate the number of shares outstanding of each of the issuer's
classes of Common Stock, as of the latest practicable date.
Common Stock $0.01 par value 14,044,940
---------------------------- ----------------------------------
(Class) (Outstanding at November 15, 1996)
<PAGE>
DONNKENNY, INC. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
(FORM 10-QA)
<TABLE>
<CAPTION>
Page
----
<S> <C>
PART I - FINANCIAL INFORMATION
Consolidated financial statements:
Balance sheets as of September 30, 1996 (unaudited) and December 2, 1995 ........................ I-1
Statements of income for the three months ended and nine months ended
September 30, 1996 and September 2, 1995 (unaudited) ........................................... II-1
Statements of cash flows for the nine months ended
September 30, 1996 and September 2, 1995 (unaudited) ........................................... III-1
Notes to Consolidated Financial Statements....................................................... IV-1
Management's Discussion and Analysis of Financial Condition and
Results of Operations ........................................................................... V-1
PART II - OTHER INFORMATION
Legal Proceedings ............................................................................... VI-1
Defaults Upon Senior Securities ................................................................. VI-1
Exhibits and Reports on Form 8-K ................................................................ VI-1
Signatures ...................................................................................... VI-2
</TABLE>
<PAGE>
DONNKENNY, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(In Thousands)
September 30, 1996 and December 2, 1995
<TABLE>
<CAPTION>
September 30, December 2,
1996 1995
------------- -----------
(unaudited) (Restated)
<S> <C> <C>
ASSETS
CURRENT:
Cash $ 1,119 $ 2,688
Accounts receivable - net of allowances of
$2,600 and $1,946 in 1996 and 1995, respectively 53,345 49,834
Recoverable income taxes 8,231 6,921
Inventories (Note 2) 59,851 47,660
Deferred tax assets 2,414 2,414
Prepaid expenses and other current assets 3,160 1,464
-------- --------
TOTAL CURRENT ASSETS 128,120 110,981
Property, plant and equipment, net 11,855 12,670
Intangible assets 32,776 34,013
-------- --------
Total Assets $172,751 $157,664
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT:
Current portion of long-term debt $ 69,123 $ 7,092
Accounts payable 23,041 13,178
Accrued expenses and other current liabilities 7,845 10,354
-------- --------
TOTAL CURRENT LIABILITIES 100,009 30,624
Long-term debt, net of current portion 162 55,519
Deferred income taxes 6,689 6,287
STOCKHOLDERS' EQUITY:
Common stock, $.01 par value. authorized 20,000 shares;
issued and outstanding 14,215 and 13,968
shares in 1996 and 1995, respectively 140 139
Additional paid-in capital 46,342 45,744
Retained earnings 19,409 19,351
-------- --------
Total stockholders' equity 65,891 65,234
Total Liabilities and Stockholders' Equity $172,751 $157,664
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
I - 1
<PAGE>
DONNKENNY, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
(In Thousands, Except Share and Per Share Data)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
------------------------- -------------------------
9/30/96 9/2/95 9/30/96 9/2/95
----------- ----------- ----------- -----------
(Restated) (Restated) (Restated) (Restated)
<S> <C> <C> <C> <C>
Net sales $ 82,482 $ 66,442 $ 184,401 $ 112,037
Cost of sales 61,953 47,079 138,777 79,582
----------- ----------- ----------- -----------
Gross profit 20,529 19,363 45,624 32,455
Selling, general and administrative expenses 11,246 10,968 37,110 23,659
Amortization of excess cost over fair value of net assets
acquired and other related acquisition costs 402 298 1,137 674
----------- ----------- ----------- -----------
Operating income 8,881 8,097 7,377 8,122
Interest expense 1,357 1,102 3,499 2,341
----------- ----------- ----------- -----------
Income before income taxes 7,524 6,995 3,878 5,781
Income taxes 3,086 2,784 1,551 2,315
----------- ----------- ----------- -----------
Net income $ 4,438 $ 4,211 $ 2,327 $ 3,466
=========== =========== =========== ===========
Net income per common share $ 0.31 $ 0.30 $ 0.17 $ 0.25
=========== =========== =========== ===========
Weighted average number of common shares outstanding
and common stock equivalents 14,100,000 13,932,420 13,900,000 13,800,000
=========== =========== =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
II-1
<PAGE>
DONNKENNY, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(In Thousands)
(Unaudited)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
-----------------------------
September 30, September 2,
1996 1995
------------- ------------
CASH FLOWS FROM OPERATING ACTIVITIES: (Restated) (Restated)
<S> <C> <C>
Net income $ 2,327 $ 3,466
Adjustments to reconcile net income to net cash provided by operating
activities:
Increase in deferred income taxes 402 231
Depreciation and amortization of fixed assets 1,416 1,049
Amortization of intangibles 1,137 667
Accretion of debt discount -- 6
Provision for losses on accounts receivable (591) 330
Changes in assets and liabilities:
Increase in accounts receivable (20,150) (13,215)
Decrease (increase) in recoverable income taxes (652) (3,766)
Increase in inventories (9,103) (13,967)
(Increase) decrease in prepaid expenses and
other current assets (163) 280
Increase (decrease) in accounts payable 11,681 (677)
Increase (decrease) in accrued expenses and other
current liabilities (2,196) 3,618
Increase in income taxes payable -- 1,552
-------- --------
Net cash used in operating activities (15,892) (20,426)
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of fixed assets (767) (496)
Investment in acquistions, net of acquired cash -- (29,326)
-------- --------
Net cash used in investing activities (767) (29,822)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of long-term debt (4,379) (18,540)
Long-term borrowings -- 66,000
Net borrowings under revolving credit line 16,093 --
Exercise of stock options 599 2,033
-------- --------
Net cash provided by financing activities 12,313 49,493
-------- --------
NET DECREASE IN CASH (4,346) (755)
CASH, AT BEGINNING OF YEAR 5,465 1,606
-------- --------
CASH, AT END OF QUARTER $ 1,119 $ 851
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
III - 1
<PAGE>
DONNKENNY, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(In Thousands Except Per Share Data)
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been
prepared by the Company pursuant to the Rules of the Securities and Exchange
Commission ("SEC") and in the opinion of management, include all adjustments,
(consisting of normal recurring accruals) necessary for the fair presentation
of financial position, results of operations and cash flows. Certain
information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
condensed or omitted pursuant to such SEC rules. The Company believes the
disclosures made are adequate to make such financial statements not
misleading. The results for the interim periods presented are not necessarily
indicative of the results to be expected for the full year. These financial
statements should be read in conjunction with the Company's December 31, 1996
Form 10-K which includes restated financial information for the 1994 and 1995
fiscal years. Balance sheet data as of December 2, 1995 has been derived from
audited financial statements of the Company.
NOTE 2 - INVENTORIES
Inventories consist of the following:
September 30, December 2,
1996 1995
---- ----
(Restated see Note 1)
Raw materials $14,331 $11,071
Work-in-process 4,757 4,783
Finished goods 40,763 31,806
------- -------
$59,851 $47,660
======= =======
NOTE 3 - ACQUISITIONS
In June 1995, the Company acquired all of the issued and outstanding
shares of Beldoch Industries Corporation ("Beldoch") for $13,000 in cash and a
$2,000 note payable, due within one year of the closing date and bearing 6%
interest. The transaction was financed by a portion of the proceeds of a
$25,000 term note and a $60,000 revolving note.
IV - 1
<PAGE>
In July 1995, the Company completed the purchase of certain assets of
the Sportswear Division of Oak Hill Sportswear Corporation ("Oak Hill") for
$14,600, financed by additional borrowing under the Company's revolving
credit line. The excess of fair market value of net assets acquired was
recorded as goodwill and is being amortized over 20 years.
The operating results of each acquisition are included in the
Company's consolidated results of operations from the respective dates of
acquisition. The following unaudited proforma information assumed the
acquisitions of Beldoch and Oak Hill were completed as of December 4, 1994.
The results have been presented for comparative purposes only and do not
purport to be indicative of results that would have been incurred if they had
been made at the beginning of the respective year, or results that may occur
in the future.
Nine Months Ended
September, 2, 1995
(Restated - See Note 1)
-----------------------
Net Sales $167,429
Operating Income $(1,397)
Loss per share $(0.10)
NOTE 4 - STOCK SPLIT
On November 17, 1995 , the Board of Directors authorized a two-for-one
stock split, which was paid to all holders of record on December 4, 1995. All
references in the accompanying consolidated financial statements to number of
shares, per share amounts, and prices of the Company's common stock for
periods prior to December 4, 1995 have been restated to reflect the stock
split.
NOTE 5 - RESTATEMENT OF FINANCIAL INFORMATION
The Company has restated its financial statements for the years ended
December 2, 1995 and December 3, 1994, as well as the quarters within such
years and the two quarters of fiscal 1996 because of errors discovered for
those periods subsequent to the issuance of such financial statements. The
financial statements for the aforementioned periods required restatement to
correct the reporting for the recognition of net sales, cost of sales and
certain expenses. The third quarter of fiscal 1996 was restated for the
rescission of the Fashion Avenue acquisition and to reflect additional
reserves. Subsequent to filing Form 10-Q for the nine months ended September
30, 1996 the Company mutually agreed with the former owner of Fashion Avenue
Knits and Related Companies to rescind the previously announced acquisition of
these businesses. This resulted in a reduction in net sales of $3.5 million
and a reduction in net income of $0.6 million for the third quarter. In
addition the third quarter net sales were reduced by $0.6 million to reflect
additional reserves for sales returns and markdowns which resulted in a
reduction in net income of $0.1 million.
In January 1997 the Company mutually agreed with the former owner of Fashion
Avenue Knits and Related Companies to pay a total of $0.5 million in cash,
stock and expenses which was accrued in the fourth quarter of fiscal 1996.
The impact of the restatement on the Company's statement of operations
and balance sheets is summarized as follows:
IV - 2
<PAGE>
<TABLE>
<CAPTION>
3 MONTHS ENDED September 30, 1996 September 2, 1995
- -------------- ------------------------- -------------------------
(As Originally (As Originally
STATEMENT OF OPERATIONS Reported) (Restated) Reported) (Restated)
- ----------------------- --------- ---------- --------- ----------
<S> <C> <C> <C> <C>
Net Sales .................. $86,562 $82,482 $70,258 $66,442
Gross Profit ............... 21,492 20,529 20,458 19,363
Operating Income ........... 9,167 8,881 10,257 8,097
Net Income ................. 4,583 4,438 5,403 4,211
Per common share:
Net Income ......... $ 0.33 $ 0.31 $ 0.39 $ 0.30
3 MONTHS ENDED September 30, 1996 September 2, 1995
- -------------- ------------------------- -------------------------
(As Originally (As Originally
STATEMENT OF OPERATIONS Reported) (Restated) Reported) (Restated)
- ----------------------- --------- ---------- --------- ----------
Net Sales .................. $189,774 $184,401 $149,515 $112,037
Gross Profit ............... 49,513 45,624 43,516 32,455
Operating Income ........... 11,132 7,377 18,749 8,122
Net Income ................. 4,478 2,327 9,684 3,466
Per common share:
Net Income ......... $ 0.32 $ 0.17 $ 0.70 $ 0.25
3 MONTHS ENDED September 30, 1996 December 2, 1995
- -------------- ------------------------- -------------------------
(As Originally (As Originally
BALANCE SHEET Reported) (Restated) Reported) (Restated)
- ------------- --------- ---------- --------- ----------
Current Assets ............. $131,580 $128,120 $111,603 $110,981
Total Assets ............... 190,824 172,751 161,647 157,664
Total Liabilities .......... 117,934 106,860 93,287 92,430
Stockholder's Equity ....... 72,890 65,891 68,360 65,234
</TABLE>
NOTE 6 - CHANGE OF FISCAL YEAR
On September 11, 1996 the Company changed its fiscal year from one
ending on the first Saturday of each year on or after November 30th to
December 31st year end. The Statement of operations and cash flow for the
transition period from December 3, 1995 to December 31, 1995 are presented on
pages IV - 3 of this report. Such financial data have been restated (see Note
5).
IV-3
<PAGE>
CONSOLIDATED STATEMENT OF OPERATIONS & CASH FLOWS
(In Thousands)
For the Transition Period from December 3, 1995
to December 31, 1995
INCOME STATEMENT
Net sales $ 6,838
Cost of goods sold 5,923
-----------
Gross profit 915
Operating expenses 4,224
Amortization of goodwill 114
-----------
Operating loss (3,424)
Interest expense 422
-----------
Net loss before income tax (3,846)
Tax benefit (1,577)
-----------
===========
Net loss $ (2,269)
===========
CASH FLOW DATA
Cash flow from operating activities $ 7,827
Cash flow from investing activities (11)
Cash flow from financing activities (5,039)
Net increase in cash 2,777
Cash at beginning of period 2,688
Cash at end of period 5,465
IV-4
<PAGE>
DONNKENNY, INC AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
COMPARISON OF NINE MONTHS ENDED SEPTEMBER 30, 1996 AND SEPTEMBER 2, 1995
Net sales increased $72.4 million or 64.6% from $112.0 million for the
first nine months of fiscal 1995 to $184.4 million for the first nine months
of fiscal 1996. Fiscal 1996 includes net sales for Beldoch and Oak Hill for
the full nine month period as compared to the three and two month periods,
respectively, following their acquisition in fiscal 1995. The inclusion of
first half net sales from these two divisions in fiscal 1996 accounted for
$52.2 million of the increase. The fiscal year was changed in fiscal 1996 (see
note 6), resulting in the inclusion of September 1996 versus December 1995
which accounted for $18.5 million of the increase. The balance of the net
sales increase was achieved in each of the Company's other divisions, other
than the Lewis Frimel Division where net sales declined.
Gross profit increased to $45.6 million for the first nine months of
fiscal 1996 from $32.5 million for the first nine months of fiscal 1995 due to
the increase in net sales discussed above, offset by pricing pressures at one
division, as well as the mix of products sold. The gross margin percentage
declined to 24.7% of net sales in 1996 from 29.0% in 1995.
Selling, general and administrative expenses increased to $37.1 million,
or 20.1% of net sales for the first nine months of fiscal 1996 from $23.7
million, or 21.1% of net sales for the first nine months of fiscal 1995. Of
the $13.4 million increase, $12.9 million relates to Beldoch and Oak Hill. The
increase in SG&A expenses was due primarily to the higher selling expenses
related to Beldoch and Oak Hill.
Amortization of goodwill increased to $1.1 million for the first nine
months of fiscal 1996 from $0.7 million for the first nine months of fiscal
1995, due to the businesses acquired in June and July of fiscal 1995 being
included for the entire nine month period in fiscal 1996.
Interest expense increased to $3.5 million for the first nine months of
fiscal 1996 compared to $2.3 million for the first nine months of fiscal 1995
due to higher borrowings to finance the June 1995 acquisition of Beldoch and
the July 1995 Oak Hill acquisition and higher average borrowings to finance
the increase in working capital. Interest rates were comparable in both
periods.
The Company provided for taxes at an effective rate of 40.0% for the first
nine months of fiscal 1996 and fiscal 1995.
COMPARISON OF QUARTERS ENDED SEPTEMBER 30, 1996 AND SEPTEMBER 2, 1995
Net sales increased $16.1 million or 24.1% from $66.4 million for the third
quarter of fiscal 1995 to $82.5 million for the third quarter of fiscal 1996.
The increase relates to stronger sales in all product categories and inclusion
of the month of September results in the fiscal 1996 third quarter as compared
to June results in the fiscal 1995 third quarter, as a result of the Company's
change in fiscal reporting periods. The change in fiscal year, accounted for
$11.5 million of the increase.
Gross profit increased to $20.5 million for the third quarter of fiscal 1996
as compared to $19.4 million for the third quarter of fiscal 1995. The
decrease in gross margin as a percentage of sales from 29.1% in fiscal 1995 to
24.9% in fiscal 1996 relates to pricing pressures at one division, as well as
the mix of products sold.
Selling, general and administrative expenses increased to $11.2 million or
13.6% of net sales for the third quarter of fiscal 1996 from $11.0 million or
16.5% of net sales in the third quarter of fiscal 1995. The decrease in SG&A
expenses as a percent of net sales, was due primarily to savings resulting
from the consolidation of administrative functions of businesses acquired in
fiscal 1995 and increases in net sales.
Interest expense increased by $0.3 million during the third quarter of
fiscal 1996 to $1.4 million from $1.1 million during the third quarter of
fiscal 1995. The increase was due principally to higher borrowings under the
revolving credit line to finance the June 1995 acquisition of Beldoch and the
July 1995 acquisition of Oak Hill Industries and higher average borrowings to
finance increases in working capital. Interest rates were comparable in both
periods.
V-1
<PAGE>
The Company provided for taxes at an effective rate of 41.0% for the third
quarter of fiscal 1996 and 39.8% for the third quarter of fiscal 1995.
LIQUIDITY AND CAPITAL RESOURCES
The Company's liquidity requirements arise from the funding of working
capital needs, primarily inventory and accounts receivable, and the interest
and principal payments related to certain indebtedness. The Company's
borrowing requirements for working capital fluctuate throughout the year.
Capital expenditures were $0.8 million for the nine months ended September
30, 1996 compared to $0.5 million for the nine months ended September 2, 1995.
The Company may spend up to $3.0 million annually on capital investments in
accordance with the Chemical Bank Revolving Credit Agreement described below.
The Company has no material capital expenditure commitments.
Donnkenny Apparel, Inc. and Beldoch Industries Corporation (Both
wholly-owned subsidiaries of the Company) as borrowers (the "Borrowers"), the
Company and the Company's other two subsidiaries as guarantors and The Chase
Manhattan Bank, The Bank of New York and Fleet Bank, N.A. as lenders, are
parties to a credit facility entered into in June 1995 (such credit facility,
as amended to date, the "Credit Facility"). The Company was in default under
the Credit Facility with respect to certain representations and covenants
regarding the timeliness and accuracy of the Company's financial information.
As a result of such defaults, approximately $64 million of the Company's
long-term debt under the Credit Facility as of September 30, 1996 has been
reclassified as current debt. Effective November 20, 1996, the Company entered
into a Fifth Amendment and Waiver Agreement (the "Fifth Amendment"), which
includes a waiver of such defaults through February 27, 1997. In the event
that the Company, following such period, is unsuccessful in obtaining a
further waiver, the lenders could declare the entire outstanding amount to be
due and payable, which could have a material adverse effect on the Company.
The Fifth Amendment, among other provisions, also (I) reduces the amount
of funds available under the revolving credit portion of the Credit Facility
from a maximum of $60 million to a maximum of $43 million at November 20,
1996, subject to incremental reductions to $31 million at February 21, 1997,
and subject to further reductions based upon alternative formulas; (II)
restricts the Borrowers from utilizing Eurodollar loans and increases the
interest rate on prime rate loans by 1.0% during the waiver period; (III)
imposes additional reporting requirements on the Company; and (IV) requires
the execution by the borrowers and their bankers of blocked account and
lockbox agreements. The foregoing discussion is qualified in its entirety by
reference to the full text of the Fifth Amendment, which is filed as part of
this report.
During the nine months ended September 30, 1996, the Company's operating
activities used $15.9 million more cash than was generated principally as the
result of increases in inventory and accounts receivable and decreases in
accrued expenses, offset by increases in accounts payable and net income.
During the nine months ended September 2, 1995, the Company's operating
activities used $20.4 million more cash than was generated principally as the
result of increases in inventory and accounts receivable, offset by increases
in accrued expenses and net income. In addition, recoverable income tax
increased by $3.8 million in fiscal 1995. Cash used in investing activities in
fiscal 1996 and 1995 was $0.8 million and $0.5 million, respectively, and
included purchases of machinery and equipment, office furniture, building
improvements and leasehold improvements to the Company's South Carolina
Warehouse facility. During fiscal 1995, cash used for investment in
acquisitions was $29.3 million, net of cash acquired. In June of 1995, the
Company acquired all of the issued and outstanding shares of Beldoch
Industries Corporation ("Beldoch") for $13.0 million in cash and a $2.0
million note payable within one year of the closing date, bearing interest at
6.0%. The transaction was financed with long-term borrowings. The Company may
be obligated to pay the former owners additional consideration based on future
earnings levels. Any additional consideration paid will be recorded as
goodwill and amortized over the remainder of the 20-year period subsequent to
the acquisition. In July of fiscal 1995, the Company completed the purchase of
certain assets of Oak Hill for $14.6 million, financed by additional
borrowings under the Company's revolving credit facility. The excess of the
fair market value of net assets acquired were recorded as goodwill and are
being amortized over 20 years. Cash flow from financing activities in fiscal
1996 of $12.3 million primarily reflect increases in revolving loan borrowings
of $16.1 million and repayment of long term debt of $4.4 million. The Company
believes (I) that amounts available under the revolving credit facility (as
amended by the Fifth Amendment) will be sufficient to offset any negative
operating cash flows
V-2
<PAGE>
and capital expenditures and will provide the Company with sufficient cash for
its needs through February 27, 1997 and (II) that thereafter it will be
successful in extending the Credit Facility or obtaining financing from other
sources; however, there can be no assurance in either regard.
V-3
<PAGE>
PART II. OTHER INFORMATION
Items 1. Legal Proceedings
On November 12, 1996, a shareholder of the Company, Ellen
Grader, filed a lawsuit in the United States District Court
in the Southern District of New York seeking class-action
status on behalf of all purchasers of the Company's Common
Stock between February 14, 1995 and November 6, 1996. The
Complaint alleges that the Company violated federal
securities laws and concealed material facts about the
Company's financial statements during such period.
The Company is aware of the existence of a lawsuit filed on
November 18, 1996 in the United States District Court in the
Southern District of New York Seeking class-action status on
behalf of all purchasers of the Company's Common Stock
between September 24, 1996 and November 13, 1996. The
Company is also aware of the existence of a lawsuit filed on
November 20, 1996 in the United States District Court in the
Southern District of New York Seeking class-action status on
behalf of all purchasers of the Company's Common Stock
between February 14, 1995 and November 15, 1996. The Company
has not been formally served with complaints by the
plaintiffs in either of such suits. According to press
reports, at least one other similar case has been, or is in
the process of being filed.
Item 2. Not Applicable
Item 3. Defaults Upon Senior Securities
The Company was in default under the Credit Facility with
respect to certain representations and covenants regarding
the timeliness and accuracy of the Company's financial
information under the Credit Facility. Effective November
20, 1996, the Company entered into the Fifth Amendment,
which includes a waiver of such defaults through February
27, 1997. In the event that the Company, following such
Period, has not corrected such defaults as required by the
Fifth Amendment and is unsuccessful in obtaining a further
waiver, the lender could declare the entire outstanding
amount to be due and payable, which could have a material
adverse effect on the company. See "Management's Discussion
and Analysis of Financial Conditions and Results of
Operations - Liquidity and Capital Resources".
Item 4. Not Applicable.
Item 5. Not applicable
Item 6. Exhibits and reports on form 8-K.
(a) The following documents are filed as part of this report:
1. Fifth Amendment Agreement dated as of November 21, 1996
to the Credit Agreement dated as of June 5, 1995 among
Donnkenny Apparel Inc., Beldoch Industries Corporation,
the Guarantors Named therein, the Lenders Named therein,
and the Chase Manhattan Bank, as agent. (1)
(b) Reports on Form 8-K
The Company filed a Current Report on Form 8-K having a
report date of September 6, 1996.
(1) Incorporated herein by reference to the Company's Report on Form 10-Q for
the quarterly period ended September 30, 1996 as filed with the Commission
on November 22, 1996.
VI-1
<PAGE>
S I G N A T U R E S
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.
Donnkenny, Inc.
----------------------------
Registrant
Date: June 11, 1997
----------------------- ----------------------------
Harvey Appelle
Chairman of the Board,
President and Chief
Executive Officer
Date: June 11, 1997
----------------------- ----------------------------
Stuart S. Levy
Vice President - Finance
and Chief Financial Officer,
(Principal Financial Officer)
VI-2
