SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
May 1, 1997
Date of Report (Date of earliest event reported)
Empire of Carolina, Inc.
(Exact name of registrant as specified in its charter)
Delaware 1-7909 13-2999480
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
5150 Linton Boulevard, 5th Floor, Delray Beach, Florida 33484
(Address of principal executive offices) (Zip Code)
(561) 498-4000
(Registrant's telephone number)
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ITEM 5. OTHER EVENTS.
On May 1, 1997, the Registrant issued the press release attached hereto
as Exhibit 99, which press release is hereby incorporated by reference herein.
Such press release announces the Registrant's first quarter financial results
and certain other recent developments, including an agreement with the
Registrant's senior lenders to amend its senior loan agreement. A form
of such amendment is attached hereto as Exhibit 10.39 and is hereby
incorporated by reference herein.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
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Exhibit
Number Description
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10.39 Form of Third Amendment to Loan and Security Agreement among
LaSalle National Bank, BT Commercial Corporation, Congress
Financial Corporation (Central), The CIT Group/Credit Finance,
Inc., Finova Capital Corporation, Empire Industries, Inc. and
Empire of Carolina, Inc.
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99 Press Release, dated May 1, 1997.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
EMPIRE OF CAROLINA, INC.
By /s/ Lawrence Geller
Name: Lawrence Geller
Title: Vice President and
General Counsel
Date: May 1, 1997
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EXHIBIT INDEX
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Exhibit
Number Description
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10.39 Form of Third Amendment to Loan and Security Agreement among
LaSalle National Bank, BT Commercial Corporation, Congress
Financial Corporation (Central), The CIT Group/Credit Finance,
Inc., Finova Capital Corporation, Empire Industries, Inc. and
Empire of Carolina, Inc.
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99 Press Release, dated May 1, 1997.
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EXHIBIT 10.39
April 30, 1997
Empire Industries, Inc.
501 Daniel Street
Tarboro, North Carolina
Reference is made to that certain Loan and Security Agreement (the
"Loan Agreement") dated as of May 29, 1996 among Empire Industries, Inc.
("Empire"), LaSalle National Bank, as collateral agent for itself ("LaSalle"),
BT Commercial Corporation, as a lender ("BTCC"), and each other lender now or
hereafter a party to the Loan Agreement (LaSalle, BTCC, and each such other
lender are sometimes collectively referred to as "Lenders"), BTCC as
administrative agent for all Lenders and all other Lenders. Capitalized terms
not otherwise defined herein shall have the meaning ascribed to such terms in
the Loan Agreement. Reference is further made to (a) that certain First
Amendment to Amended and Restated Loan and Security Agreement dated December 6,
1996 among Empire, Agents and Lenders (the "First Amendment") and (b) that
certain Consent and Second Amendment to Loan and Security Agreement dated
February 4, 1997 among Empire, Agents and Lenders (the "Second Amendment").
The parties hereto hereby agree as follows:
1. Pursuant to the First Amendment, a new subparagraph 13(n) was added
to the Loan Agreement, which required that Borrower receive an equity
contribution of at least $6,000,000 during the period from November 15, 1996 and
April 30, 1997, on terms and subject to conditions satisfactory to Agents and
Lenders. The parties hereto hereby agree to extend the date by which such equity
contribution must be received by Borrower from April 30, 1997 to May 31, 1997.
2. Pursuant to paragraph 2 of the Second Amendment, Agents and Lenders
agreed to negotiate with Borrower in good faith to set new covenant levels for
the covenants contained in Paragraphs 12(o) and 12(p) of the Loan Agreement, to
be effective beginning May 1, 1997, and further agreed that in the event such
negotiations did not result in an agreement, commencing May 1, 1997 the covenant
levels currently contained in Paragraphs 12(o) and 12(p) would be reinstated.
The parties hereto hereby agree to extend the date by which either such new
covenants shall become effective or the current covenants shall be reinstated
from May 1, 1997 to June 1, 1997.
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Except as expressly provided hereby, the Loan Agreement, as amended by
the First Amendment and the Second Amendment, shall remain unchanged and in full
force and effect in accordance with the terms thereof.
This letter shall not become effective until executed by all parties
hereto.
Very truly yours,
LASALLE NATIONAL BANK,
as Collateral Agent and a Lender
By /s/ Robert Corsentino
Its: Senior Vice President
Consented and agreed to this _____ day of ___________, 1997.
BT COMMERCIAL CORPORATION,
as Administrative Agent
and a Lender
By ____________________
Its: __________________
CONGRESS FINANCIAL CORPORATION
(CENTRAL), as a Lender
By ____________________
Its: __________________
THE CIT GROUP/CREDIT FINANCE, INC.,
as a Lender
By: ___________________
Its: _________________
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<PAGE>
FINOVA CAPITAL CORPORATION,
as a Lender
By ___________________
Its: ________________
Accepted and agreed to this ____ day of _________ 1997.
EMPIRE INDUSTRIES, INC.
By ___________________
Its: ________________
The undersigned Guarantor hereby acknowledges that it has read the
foregoing letter and all previous amendments and modifications of the Loan
Agreement and hereby reaffirms its guaranty of the obligations of the Borrower
this ___ day of _______, 1997.
EMPIRE OF CAROLINA, INC.
By __________________
Its ________________
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<PAGE>
EXHIBIT 99
FOR IMMEDIATE RELEASE
EMPIRE OF CAROLINA ANNOUNCES
FIRST QUARTER RESULTS, COMMENTS ON RECENT DEVELOPMENTS
Delray Beach, FL, May 1, 1997 -- Empire of Carolina, Inc. (AMEX: EMP)
today announced financial results for the first quarter of 1997. Net sales for
the quarter ended March 31, 1997 increased 15.8% to $25.7 million from $22.2
million for the same quarter of 1996. The net loss for the quarter was $3.3
million or $0.44 per share compared to a net less of $2.2 million or $0.41 per
share in 1996.
The Company also reported that it is discussing terms of various
transactions with interested parties and that its lenders have agreed to extend,
to May 31, 1997, the time for the Company to obtain the $6 million of additional
financing required by the December 1996 amendment to its senior loan agreement.
Although the Company is optimistic that it will complete a transaction, no
assurances can be given that a transaction will be consummated, that cash
generated from operations will be sufficient to fund the Company's continued
operations, or, in the event that additional financing is not obtained, that the
Company's lenders will continue to provide financing beyond May 31, 1997.
The Company also reported that Marvin Smollar resigned from the
Company's Board of Directors effective April 24, 1997.
This press release contains various forward-looking statements and
information that are based on management's beliefs as well as assumptions made
by and information currently available to management. Such statements are
subject to various risks and uncertainties which could cause actual results to
vary materially from those stated. Should one or more of these risks or
uncertainties materialize or should underlying assumptions prove incorrect
actual results may vary materially from those anticipated, estimated, expected
or projected. Such risks and uncertainties include the Company's ability to
obtain additional financing or further extensions of the Company's senior credit
line, the Company's ability to manage inventory production and costs, to meet
potential increases or decreases in demand, potential adverse customer impact
due to delivery delays including effects on existing and future orders,
competitive practices in the toy and decorative holiday products industries,
changing consumer preferences and risks associated with consumer acceptance of
new product introductions, potential increases in raw material prices, potential
delays or production problems associated with foreign sourcing of production and
the impact of pricing policies including providing discounts and allowances.
Certain of these as well as other risks and uncertainties are described in more
detail in the Company's Registration Statement on Form S-1 filed under the
Securities Act of 1933, Registration No. 333-4440. The Company undertakes no
obligation to update any such factors
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or to publicly announce the result of any revisions to any of the
forward-looking statements contained herein to reflect future events or
developments.
Empire of Carolina, Inc. designs, develops, manufactures and markets a
broad range of basic plastic children's toys. It's Holiday Products Division
produces and markets decorative seasonal items including Christmas, Halloween
and Easter illuminated products. The Company's full line of basic toys includes
the Big Wheel(R) line of ride-on toys, Grand Champions(R) collectible horses,
Buddy L(R) cars and trucks, and Power Driver(R) ride-ons.
EMPIRE OF CAROLINA, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED)
(IN THOUSANDS, EXCEPT FOR SHARE AMOUNTS)
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Three Months Ended March 31,
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1997 1996
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NET SALES $ 25,686 $ 22,186
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COST OF GOODS SOLD 21,878 16,217
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GROSS PROFIT 3,808 5,969
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SELLING AND
ADMINISTRATIVE EXPENSES 6,493 7,298
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OPERATING LOSS (2,685) (1,329)
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INTEREST EXPENSE (2,006) (2,119)
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LOSS BEFORE INCOME TAXES (4,691) (3,448)
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INCOME TAX BENEFIT (1,440) (1,292)
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NET LOSS $ (3,251) $ (2,156)
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LOSS PER COMMON SHARE $ (0.44) $ (0.41)
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WEIGHTED AVERAGE
COMMON SHARES
OUTSTANDING 7,404 5,201
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