UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended APRIL 4, 1999
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____________ to _____________
Commission File No. 1-7909
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EMPIRE OF CAROLINA, INC.
------------------------
(Exact name of Registrant as specified in its charter)
DELAWARE 13-2999480
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(State or other jurisdiction of incorporation or (I.R.S. Employer
organization) Identification Number)
5150 LINTON BOULEVARD, 5TH FLOOR, DELRAY BEACH, FL 33484
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(Address of principal executive office)
(Zip Code)
(561) 498-4000
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Registrant's telephone number, including area code)
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(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) and (2) has been subject to such filing
requirements for the past 90 days. Yes X No __
The number of shares outstanding of the issuer's Common Stock, $.10 par value,
as of April 23, 1999 was 16,629,582.
<PAGE>
PART I - FINANCIAL INFORMATION
This Form 10-Q contains various forward-looking statements and information,
including under the caption "Management's Discussion and Analysis of Financial
Condition and Results of Operations," that are based on management's beliefs as
well as assumptions made by and information currently available to management,
including statements regarding future economic performance and financial
condition, liquidity and capital resources and management's plans and
objectives. When used in this document, the words "expect," "anticipate,"
"estimate," "believe," and similar expressions are intended to identify
forward-looking statements. 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 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, golf 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, reliance on key customers, the seasonality of the Company's
business, the ability of the Company to meet existing financial obligations in
the event of adverse industry or other developments, and the Company's ability
to obtain additional capital to fund future commitments and operations. Certain
of these as well as other risks and uncertainties are described in more detail
in the Company's Annual Report on Form 10-K for the year ended December 31, 1998
and the Company's Registration Statement on Form S-3 filed under the Securities
Act of 1933, Registration No. 333-57963. The Company undertakes no obligation to
update any such factors or to publicly announce the result of any revisions to
any of the forward-looking statements contained herein to reflect future events
or developments.
<PAGE>
ITEM 1. FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
EMPIRE OF CAROLINA, INC., AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(In thousands except share amounts)
April 4, December 31,
1999 1998
-------------------- -----------------------
(Unaudited)
ASSETS
CURRENT ASSETS:
<S> <C> <C>
Cash and cash equivalents $ 3,280 $ 4,295
Accounts receivable, less allowances and other
deductions (1999-$4,366; 1998-$5,083) 11,757 11,462
Inventories, net 12,280 10,876
Prepaid expenses and other current assets 268 817
--------- ---------
Total current assets 27,585 27,450
PROPERTY, PLANT AND EQUIPMENT, NET 11,529 11,571
EXCESS COST OVER FAIR VALUE OF NET ASSETS ACQUIRED, NET 12,502 12,670
TRADEMARKS, PATENTS, TRADENAMES AND LICENSES, NET 5,440 5,565
OTHER NONCURRENT ASSETS 750 390
--------- ---------
$ 57,806 $ 57,646
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes payable and current portion of long-term debt $ 19,362 $ 17,547
Accounts payable - trade 8,375 7,718
Other accrued liabilities 8,263 8,535
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Total current liabilities 36,000 33,800
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LONG-TERM LIABILITIES:
Long-term debt 6,050 6,450
Other noncurrent liabilities 1,672 1,639
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Total long-term liabilities 7,722 8,089
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Total liabilities 43,722 41,889
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COMMITMENTS AND CONTINGENCIES (NOTE 3)
STOCKHOLDERS' EQUITY:
Common stock, $.10 par value, 60,000,000 shares authorized, shares
issued and outstanding: 1999 - 16,615,000 and 1998 - 16,117,000 1,662 1,612
Preferred stock, $.01 par value, 5,000,000 shares authorized
Issued and outstanding: 1999 - 1,755,000 and 1998 - 1,751,000
shares of Series A convertible preferred stock and 1,451 shares
of Series C convertible preferred stock 17 18
Additional paid-in capital 115,914 115,813
Deficit (103,509) (101,686)
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Total stockholders' equity 14,084 15,757
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$ 57,806 $ 57,646
========= =========
</TABLE>
See notes to consolidated condensed financial statements.
2
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<TABLE>
<CAPTION>
EMPIRE OF CAROLINA, INC., AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
Quarter Ended Quarter Ended
April 4, March 31,
-------------------- --------------------
1999 1998
-------------------- --------------------
(In thousands except per share amounts)
<S> <C> <C>
Net Sales $ 15,851 $ 11,896
COST OF SALES 11,823 9,391
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GROSS PROFIT 4,028 2,505
SELLING AND ADMINISTRATIVE EXPENSE 5,007 4,493
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OPERATING LOSS (979) (1,988)
INTEREST EXPENSE (844) (987)
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LOSS BEFORE INCOME TAXES (1,823) (2,975)
INCOME TAX BENEFIT - -
-------- --------
NET LOSS $ (1,823) $ (2,975)
======== ========
LOSS PER COMMON SHARE -
Basic and diluted $ (0.11) $ (0.38)
======== ========
WEIGHTED AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING -
Basic and diluted 16,261 7,849
======== ========
</TABLE>
See notes to consolidated condensed financial statements.
3
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<TABLE>
<CAPTION>
EMPIRE OF CAROLINA, INC., AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
Quarter Ended Quarter Ended
April 4, March 31,
----------------------- ------------------------
1999 1998
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(IN THOUSANDS)
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net loss $(1,823) $(2,975)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization 1,044 1,242
Other 314 559
Changes in assets and liabilities (1,256) (42)
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Net cash used in operating activities (1,721) (1,216)
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CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (709) (60)
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Net cash used in investing activities (709) (60)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings under lines of credit 1,815 1,985
Repayments of notes payable (400) (705)
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Net cash provided by financing activities 1,415 1,280
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NET INCREASE(DECREASE) IN CASH AND CASH EQUIVALENTS (1,015) 4
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 4,295 3,483
------- -------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 3,280 $ 3,487
======= =======
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest $ 573 $ 607
Income taxes, (net of refunds) 56 (3)
</TABLE>
See notes to consolidated condensed financial statements.
4
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EMPIRE OF CAROLINA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
QUARTER ENDED APRIL 4, 1999 AND MARCH 31, 1998
(UNAUDITED)
1. SUMMARY OF BUSINESS OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES
The consolidated condensed financial statements included herein have been
prepared by the Company, without audit, pursuant to the rules and regulations of
the Securities and Exchange Commission. Certain information and disclosures
normally included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted pursuant to such
rules and regulations; however, the Company believes that the disclosures are
adequate to make the information presented not misleading. It is suggested that
these condensed financial statements be read in conjunction with the financial
statements and the notes thereto included in the Company's latest annual report
on Form 10-K.
In the opinion of management, the information contained in this report
reflects all adjustments necessary to present fairly the results for the interim
periods presented.
The consolidated condensed financial statements have been prepared on a
going concern basis, which contemplates the realization of assets and
satisfaction of liabilities in the normal course of business. Recurring losses
from operations and operating cash constraints are potential factors which,
among others, may indicate that the Company will be unable to continue as a
going concern for a reasonable period of time. The independent auditors' report
on the December 31, 1998 financial statements stated that "... the Company's
recurring losses from operations and current cash constraints raise substantial
doubt about the Company's ability to continue as a going concern . . . . The
consolidated financial statements do not include any adjustments that might
result from the outcome of this uncertainty."
The consolidated financial statements do not include adjustments relating
to the recoverability and classification of recorded asset amounts, or the
amounts and classification of liabilities that might be necessary should the
Company be unable to continue as a going concern. The Company's ability to
continue as a going concern is dependent upon its ability to generate sufficient
cash flow to meet its obligations on a timely basis and ultimately to attain
profitable operations.
In 1999, the Company implemented a 4-4-5 week monthly closing cycle for
the quarter versus the calendar month end closing dates in the prior year
quarter. This change has a minimal impact on the comparability of the interim
consolidated condensed financial statements presented.
EARNINGS PER SHARE - For the calculation of earnings per share for the
first quarter of 1999 and 1998, all of the options, warrants, convertible
securities and contingently issuable shares are excluded from basic and diluted
earnings per share because they are anti-dilutive.
USE OF ESTIMATES - The preparation of the 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 period. Actual results could differ from those estimates.
5
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2. INVENTORIES
A summary of inventories, by major classification, at April 4, 1999 and
December 31, 1998 is as follows (in thousands):
1999 1998
------------ ------------
Finished goods $ 10,855 $ 9,693
Raw materials and purchased parts 996 871
Work-in-process 429 312
============ ============
$ 12,280 $ 10,876
============ ============
Inventories are net of writedowns for lower of cost or market reserves of
$2,962,000 and $2,800,000 at April 4, 1999 and December 31, 1998, respectively.
3. COMMITMENTS AND CONTINGENCIES
ROYALTY AGREEMENTS - The Company is obligated to pay certain minimum
royalties under various trademark license agreements which aggregate
approximately $6.2 million through their initial minimum terms expiring through
June 30, 2002.
LETTERS OF CREDIT - The Company had outstanding commitments under letters
of credit totaling approximately $1,231,000 at April 4, 1999 compared to
$1,479,000 at December 31, 1998.
INDEMNIFICATIONS - In connection with the sale of businesses it previously
owned, the Company provided certain indemnifications to the purchaser. The
Company has established reserves for all claims known to it and for other
contingencies in connection with the sale. Although there can be no assurance
that claims and other contingencies related to the sale will not exceed
established reserves, the Company believes that additional exposure related to
the indemnification obligations will not be material to the consolidated
financial statements.
LITIGATION. During December 1990, George Delaney and Rehkemper I.D., Inc.
commenced a suit against an acquired company claiming infringement of various
intellectual property rights. The plaintiffs have filed an amended complaint
against the Company and a trial is scheduled for August 1999. Although the
Company is vigorously contesting the matters set forth in the amended complaint,
it is unable to determine at this time the extent of its financial exposure.
The Company's operating subsidiaries and its former operating subsidiaries
are subject to various types of consumer claims for personal injury from their
products. The Company's subsidiaries maintain product liability insurance.
Various product liability claims, each of which management believes is
adequately covered by insurance and/or reserves, are currently pending.
The Company does not believe the outcome of any of this litigation either
individually or in the aggregate would have a material adverse effect on the
Company's consolidated financial statements.
CONTINGENCIES - The Company has been identified as a potentially
responsible party, along with numerous other parties, at various U. S.
Environmental Protection Agency ("EPA") designated superfund sites. The Company
is vigorously contesting these matters. It is the Company's policy to accrue
remediation costs when it is probable that such costs will be incurred and when
they can be reasonably estimated. As of April 4, 1999 and December 31, 1998, the
Company had reserves for environmental liabilities of $98,000. The amount
accrued for environmental liabilities was determined without consideration of
possible recoveries from third parties. Estimates of costs for future
remediation are necessarily imprecise due to, among other things, the allocation
of costs among potentially responsible parties. Although it is possible that
additional environmental liability related to these matters could result in
amounts that could be material to the Company's consolidated financial
statements, a reasonably possible range of such amounts cannot presently be
estimated. Based upon the facts
6
<PAGE>
presently known, the large number of other potentially responsible parties and
potential defenses that exist, the Company believes that its share of the costs
of cleanup for its current remediation sites will not, in the aggregate, have a
material adverse impact on its consolidated financial statements.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The Company designs, manufactures and markets a broad variety of consumer
products including toys, plastic decorative holiday products, and golf shoes and
accessories. The Company has been involved in the toy and holiday products
industries for approximately 45 years. In May 1998, the Company acquired the
Apple Companies, manufacturers and distributors of Wilson(R) and Wilson Staff(R)
golf shoes and other Wilson(R) golf accessories since 1986. During 1998 the
Company began to pursue contract molding for original equipment (OEM)
manufacturers.
Sales of the Company's products are seasonal in nature. Generally, the
Company's largest sales occur in the third and fourth quarters of the year when
it ships its toys for the Christmas shopping season and holiday products for the
Christmas and Halloween shopping seasons. The Company's production generally is
heaviest in the period from June through September. Production and sales of OEM
products will better utilize plant capacity, but management still expects that
the Company's quarterly operating results will vary significantly throughout the
year.
RESULTS OF OPERATIONS
The 1998 amounts in the ensuing discussion do not include the results of
operations of Apple Sports, Inc. and Apple Golf Shoes, Inc. (together, the
"Apple Companies"), which were acquired May 28, 1998.
FIRST QUARTER ENDED APRIL 4, 1999 COMPARED TO FIRST QUARTER ENDED MARCH 31,
1998
NET SALES AND NET LOSS. Net sales for the first quarter of 1999 increased
to $15.9 million compared to $11.9 million for the first quarter of ended March
31, 1998. The net loss for the first quarter of 1999 decreased to $1.8 million
from $3.0 million during the first quarter of 1998.
The increase in net sales from the first quarter of 1998 to the first
quarter of 1999 was the result of the inclusion of sales of $5.4 million of golf
accessories in 1999. In addition, sales of YoYo Balls(R) increased by $.9
million and sales of the newly introduced Rugrats(TM) sprinklers were $.9
million. Sales of OEM products were $.2 million during the first quarter of
1999. These sales increases were offset by decreased sales of pools ($1.0
million), waterslides ($.7 million) and other items.
GROSS PROFIT MARGINS. Gross profit margins were higher for the quarter
ended April 4, 1999 (25%) as compared to the quarter ended March 31, 1998 (21%).
The improvement in gross profit margins is attributable to the inclusion of the
golf accessories business during the first quarter of 1999 and lower costs of
domestic operations.
SELLING AND ADMINISTRATIVE ("S&A"). S & A expenses were $.5 million higher
for the quarter ended April 4, 1999 as compared to the quarter ended March 31,
1998. This increase was primarily attributable to the addition of the golf
accessories business and new product development costs, offset by lower
advertising and shipping expenses.
INTEREST EXPENSE. Interest expense has decreased to $.8 million for the
first quarter of 1999 compared to $1 million during the first quarter of 1998 as
a result of lower borrowings at consistent interest rates.
SEASONALITY OF SALES
7
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Sales of many toy products are seasonal in nature. Purchase orders for the
Christmas selling season are typically secured in the months of April, May and
June so that by the end of June, the Company has historically received orders or
order indications for a substantial majority of its full year's toy business.
Products sold primarily in the spring and summer months include golf shoes and
accessories, Water Works(TM) pools, Crocodile Mile(R) water slides and other
items, which are shipped principally in the first and second quarters of the
year and counter some of the seasonality associated with the Company's toy
products. In addition, certain toys such as Big Wheel(R) ride-ons, Grand
Champions(R) horses and Buddy L(R) vehicles ship year-round. Sales of holiday
products are heavily concentrated in the Christmas and Halloween shopping
seasons with substantially all shipments occurring in the third and fourth
quarters of the year. The Company's production generally is heaviest in the
period from June through September. Production and sales of OEM products will
better utilize plant capacity during other periods. Sales of golf shoes and
accessories, which are approximately equal in each half of the year, will
complement toy sales which are more concentrated in the second half of the year.
The Company expects that its quarterly operating results will vary significantly
throughout the year.
LIQUIDITY AND CAPITAL RESOURCES
The Company has experienced operating difficulties during the past several
years, but the operating loss has been reduced to $1.8 million for the first
quarter of 1999 compared to $3.0 million for the first quarter of 1998. Despite
the improvements made during the period, the Company continues to operate under
tight cash constraints.
The Company has financed its losses primarily by additional borrowing
under its existing bank credit facilities. At April 4, 1999, the Company had
borrowed $23.5 million under those facilities and had available an additional
$5.5 million. The Company expects to continue to utilize its credit facilities
to fund any additional losses. The Company believes that existing availability
under its credit facilities will be adequate to support its projected
operations. If it is not, the Company would have to seek alternative sources of
financing. If that financing were not available, the Company would be adversely
affected.
The consolidated condensed financial statements have been prepared on a
going concern basis, which contemplates the realization of assets and
satisfaction of liabilities in the normal course of business. Recurring losses
from operations and operating cash constraints are potential factors which,
among others, may indicate that the Company will be unable to continue as a
going concern for a reasonable period of time. The independent auditors' report
on the December 31, 1998 financial statements stated that "...the Company's
recurring losses from operations, and current cash constraints raise substantial
doubt about the Company's ability to continue as a going concern . . . . The
consolidated financial statements do not include any adjustments that might
result from the outcome of this uncertainty."
The consolidated financial statements do not include adjustments relating
to the recoverability and classification of recorded asset amounts or the
amounts and classification of liabilities that might be necessary should the
Company be unable to continue as a going concern. The Company's ability to
continue as a going concern is dependent upon its ability to generate sufficient
cash flow to meet its obligations on a timely basis and ultimately to attain
profitable operations.
Due to the seasonality of its revenues, the Company's working capital
requirements fluctuate significantly during the year. The Company's seasonal
financing requirements are highest during the fourth quarter and lowest during
the first quarter. The Company's inventories, accounts receivable, accounts
payable, notes payable and current portion of long-term debt vary significantly
by quarter due to the seasonal nature of the Company's business.
The increase in inventories from the end of the year reflects purchases
and prodution of toys to fulfill projected demand. The increase in notes payable
from the end of the year reflects the funding of the loss from operations for
the quarter through existing secured bank credit facilities.
8
<PAGE>
Capital expenditures, principally for the purchase of tooling for new
products and equipment, were $709,000 for the first quarter of 1999 compared to
$60,000 for the first quarter of 1998.
The Company is subject to various actions and proceedings, including those
relating to intellectual property matters, environmental matters and product
liability matters. See notes to consolidated condensed financial statements.
YEAR 2000 READINESS DISCLOSURE
The inability of computers, software and other equipment to recognize and
properly process data fields containing a two-digit year is commonly referred to
as the Year 2000 Readiness Issue. As in the case with most companies using
computers, the Company is in the process of addressing its Year 2000 Readiness.
During the second quarter of 1998, the Company assigned a manager to the
Year 2000 project and engaged consultants to help evaluate the overall business
requirements of its systems. The Company anticipates achieving Year 2000
readiness for its information technology systems in addition to meeting other
customer requirements through the implementation of new software as a result of
this evaluation. The Company has selected software which has been installed and
is expecting full implementation during the third quarter of 1999. The Company
estimates the total cost for the new management information software, hardware
and peripherals will be approximately $300,000.
Also during the second quarter of 1998, the Company began evaluating the
Year 2000 readiness of its non-information technology systems. The Company
believes that the majority of these systems will not be affected by the Year
2000 issue, and is evaluating options to address any non-information technology
systems that will be so effected. The Company expects to have fully addressed
any issues for these systems by September 30, 1999.
The Company has identified third-party vendors which could materially
impact the business if they were unable to provide goods and services, and is in
the process of obtaining representations regarding their Year 2000 readiness.
Because of the nature of its business and seasonality, the Company feels
its exposure to Year 2000 problems could be contained to specific areas. The
Company believes that the most reasonably likely worst case scenario regarding
the Year 2000 issue would be that the new software is not installed in time or
that it has functionality issues. However, in the event that the new management
software is not fully functional or if certain non-information technology
systems have not been updated by the end of 1999, the Company would handle any
such scenarios by using manual overrides, outsourcing services, or relying upon
its current PC based software.
BACKLOG
The Company had open orders for toys of $4.1 million and $12.2 million as
of April 4, 1999 and March 31, 1998, respectively. Open orders at the end of the
first quarter mainly reflect orders for pool products and water slides and boys
and girls toys, which is the beginning of orders for fall toy product sales. The
Company believes that because order patterns in the retail industry vary from
time to time, open orders on any date in a given year are not a meaningful
indication of the future sales.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
9
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The Company is exposed to certain market risks which arise from transactions
entered into in the normal course of business. The Company's primary exposures
are changes in interest rates with respect to its debt and foreign currency
exchange fluctuations.
The Company finances its working-capital needs primarily through a variable rate
loan facility. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations - Liquidity and Capital Resources." The Company's
results may be adversely or positively affected by fluctuations in interest
rates.
The Company sources products from various manufacturers in the Far East. The
purchases are generally made in Hong Kong dollars while goods are sold in U. S.
dollars. Due to the small levels of inventory, and the historical consistency of
the Hong Kong dollar/U.S. dollar exchange rate, the Company does not believe
that any adverse or positive affect would be significant.
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Index and Exhibits
2.1 Stock Purchase Agreement dated July 29, 1988, by and among
Clabir, Clabir Corporation (California), HMW Industries, Inc.
and Olin Corporation.(1)
2.2 Agreement and Plan of Merger, dated as of November 14, 1989,
between AmBrit, Inc. ("AmBrit") and Empire of Carolina, Inc.
(the "Company"), including amendment thereto, dated as of
December 4, 1989.(2)
2.3 Agreement and Plan of Merger, dated as of November 14, 1989,
by and among the Company, Clabir Corporation ("Clabir") and
CLR Corporation, including amendment thereto, dated as of
December 4, 1989.(2)
2.4 Sale and Purchase Agreement between the Company and Cargill,
Incorporated, dated September 30, 1992.(3)
2.5 Purchase Agreement among Conopco, Inc., the Company, The Isaly
Klondike Company, Inc., The Isaly Company, Popsicle
Industries, Ltd., Ice Cream Novelties, Inc. and Smith &
O'Flaherty Limited, dated as of January 27, 1993.(4)
2.6 Agreement and Plan of Reorganization, dated October 13, 1994,
by and among the Company, Marchon, Inc. ("Marchon") and the
stockholders of Marchon.(5)
2.7 Agreement dated August 31, 1995, among the Company, CLR
Corporation, Clabir Corporation, Olin Corporation and General
Defense Corporation.(7)
3.1 Restated Certificate of Incorporation of the Company.(6)
3.2 First Amendment to Restated Certificate of Incorporation of
the Company.(8)
3.3 Amended and Restated By-Laws of the Company.(9)
3.4 Certificate of Designation of the Series B Junior
Participating Preferred Stock.(10)
3.5 Certificate of Designation Relating to Series A Preferred
Stock.(11)
3.6 Certificate of Designation Relating to Series C Preferred
Stock.(11)
4.1 Form of specimen certificate representing the Company's Common
Stock.(12)
4.2 Excerpts from the Company's amended By-Laws and the Company's
Restated Certificate of Incorporation relating to rights of
holders of the Company's Common Stock.(6)
4.3 Rights Agreement, dated as of September 11, 1996, between
Empire of Carolina, Inc. and American Stock Transfer & Trust
Company as Rights Agent, which includes (i) as Exhibit A
thereto the form of Certificate of Designation of the Series B
Junior Participating Preferred Stock, (ii) as Exhibit B
thereto the form of Right certificate (separate certificates
for the Rights will not be issued until after the Distribution
Date) and (iii) as Exhibit C thereto the Summary of
Stockholder Rights Agreement.(10)
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EXHIBIT NO. DESCRIPTION
- ----------- -----------
4.4 Warrant Agreement dated as of June 17, 1997 between the
Company and the holders from time to time of the warrants.(11)
4.5 Second Amendment dated as of June 12, 1997 to Rights
Agreement, dated as of September 11, 1996 between Empire of
Carolina, Inc. and American Stock Transfer & Trust Company as
Rights Agent.(11)
4.6 Promissory Note from the Company to Smedley Industries, Inc.
Liquidating Trust in the amount of $2,500,000.(11)
4.7 First Amendment dated as of May 5, 1997 to Rights Agreement of
September 11, 1996, between Empire of Carolina, Inc. and
American Stock Transfer and Trust Company as Rights Agent.(13)
9.1 Voting Agreement, dated September 30, 1994, by and between
Halco Industries, Inc. ("Halco") and Steve Geller.(5)
10.1 Amended and Restated 1994 Stock Option Plan of the Company.(9)
10.2 Empire of Carolina, Inc. 1996 Outside Directors Stock Option
Plan.(14)
10.3 Empire of Carolina, Inc. 1996 Employee Stock Purchase
Plan.(14)
10.4 Employment Agreement, dated July 15, 1994, by and among the
Company, Empire Industries, Inc. ("EII") and Steven
Geller.(15)
10.5 Employment Agreement, dated July 15, 1994, by and among the
Company, EII and Neil Saul.(15)
10.6 Settlement and Termination Agreement with Neil Saul.(7)
10.7 Stock Purchase Agreement, dated July 15, 1994, among Steven
Geller, Maurice A. Halperin, individually and as custodian for
the benefit of Lauren Halperin and Heather Halperin, Carol A.
Minkin, individually and as custodian for the benefit of
Joshua Minkin and Rebecca Minkin, and Halco (the Halperins and
Minkins, collectively, the "Halperin Group").(5)
10.8 Redemption Agreement, dated September 30, 1994, by and between
the Company and the Halperin Group.(5)
10.9 Omnibus Agreement, dated September 30, 1994, by and among the
Halperin Group, Steven Geller, the Company and EII.(5)
10.10 Stockholders' Agreement, dated October 13, 1994, by and among
Steven Geller, Marvin Smollar and Neil Saul.(5)
10.11 Investor's Rights Agreement, dated October 13, 1994, by and
among the Company, Marvin Smollar, Kar Ye Yeung, Tyler Bulkley
and Harvey Katz.(5)
10.12 Stockholders' Agreement dated October 13, 1994, among Steven
Geller, Marvin Smollar and Neil Saul.(5)
10.13 Debenture Purchase Agreement, dated as of December 2, 1994,
among the Company, WPG Corporate Development Associates IV
(Overseas), Ltd., Westpool Investment Trust PLC, Glenbrook
Partners, L.P., Eugene Matalene, Jr., Richard Hockman, Weiss,
Peck & Greer, as Trustee under Nora E. Kerppola IRA, Peter B.
Pfister and Weiss, Peck & Greer, as Trustee under Craig S.
Whiting IRA and WPG Corporate Development Associates IV, L.P.
(all of such parties, other than the Company, collectively,
the "WPG Group").(16)
10.14 Registration Rights Agreement, dated as of December 22, 1994,
by and between the Company, and the WPG Group.(16)
10.15 Shareholders' Agreement, dated December 22, 1994, by and among
the WPG Group, Steven Geller, Neil Saul, Marvin Smollar and
Champ Enterprises Limited Partnership.(16)
10.16 Stock Purchase Agreement, dated as of December 22, 1994,
between WPG Corporate Development Associates IV (Overseas),
Ltd. and Steven Geller.(16)
11
<PAGE>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
10.17 Assignment and Assumption Agreement dated as of June 21, 1995
between the Company and EAC.(6)
10.18 Assignment dated as of May 22, 1995 between the Company and
Carnichi Limited.(6)
10.19 Lease dated July 7, 1995 between Buddy L Inc.
Debtor-in-Possession ("Buddy L") and Empire Acquisition Corp.,
Inc. ("EAC").(6)
10.20 Form of Subscription Agreement executed in connection with
subscription of Common Stock and Preferred Stock by WPG
Corporate Development Associates IV (Overseas), L.P., Westpool
Investment Trust PLC, Glenbrook Partners, L.P., and WPG
Corporate Development Associates IV, L.P.(6)
10.21 Shareholders' Agreement ("Shareholders' Agreement") dated
December 22, 1994 among WPG Corporate Development Associates
IV, L.P., WPG Corporate Development Associates IV (Overseas),
Ltd., Weiss, Peck & Greer, as Trustee under Craig S. Whiting
IRA, Peter Pfister, Weiss, Peck & Greer, as Trustee under Nora
E. Kerppola IRA Westpool Investment Trust, PLC, Glenbrook
Partners, L.P., Steve Geller, Neil Saul, Marvin Smollar and
Champ Enterprises Limited Partnership.(17)
10.22 Amendment No. 2 to Shareholders' Agreement dated as of June
29, 1995 among WPG Corporate Development Associates IV, L.P.,
WPG Corporate Development Associates IV (Overseas), Ltd., as
the exempt transferee of WPG Corporate Development Associates
IV (Overseas), Ltd., certain persons identified on Schedule I
of Amendment No. 2 to the Shareholders' Agreement, Geller,
Saul and the Trust as the permitted transferee of Champ
Enterprises Limited Partnership.(6)
10.23 Registration Rights Agreement ("Registration Rights
Agreement") dated as of December 22, 1994 by and among Empire
of Carolina, Inc., WPG Corporate Development Associates IV,
L.P., WPG Corporate Development Associates IV (Overseas),
Ltd., Weiss Peck & Greer, as Trustee under Craig Whiting IRA,
Peter B. Pfister, Weiss, Peck & Greer, as Trustee under Nora
Kerppola IRA, Westpool Investment Trust PLC and Glenbrook
Partners, L.P.(17)
10.24 Amendment No. 1 to Registration Rights Agreement.(6)
10.25 Loan and Security Agreement dated May 29, 1996 among LaSalle
National Bank ("LaSalle"), BT Commercial Corporation ("BTCC")
and EII, with exhibits and security instruments.(18)
10.26 First Amendment to Amended and Restated Loan and Security
Agreement among LaSalle, BTCC, Congress Financial Corporation
(Central) ("Congress") and EII, with exhibits.(19)
10.27 Consent and Second Amendment to Loan and Security Agreement
among LaSalle, BTCC, Congress, the CIT Group/Credit Finance,
Inc. ("CIT"), Finova Capital Corporation ("Finova") and
EII.(20)
10.28 Third Amendment to Loan and Security Agreement among LaSalle,
BTCC, Congress, CIT, Finova and EII.(21)
10.29 Securities Purchase Agreement dated as of May 5, 1997 among
the Company, HPA Associates, LLC and EMP Associates, LLC.(22)
10.30 Amendment No. 1 dated as of June 5, 1997 to Securities
Purchase Agreement dated as of May 5, 1997 among the Company,
HPA Associates, LLC and EMP Associates, LLC.(11)
10.31 Buddy L Settlement Agreement, dated as of June 17, 1997
between the Company and Smedley Industries Inc. Liquidating
Trusts ("SLM").(11)
10.32 Letter of the Company to Pellinore Securities Corp., Axiom
Capital Management, Inc. and Commonwealth Associates, Inc.
regarding the registration rights provisions affecting the
Series A Preferred Stock.(11)
10.33 Buddy L Registration Rights Agreement dated as of June 17,
1997 between the Company and SLM.(11)
12
<PAGE>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
10.34 WPG Registration Rights Agreement dated as of June 17, 1997
among the Company and WPG Corporate Development Associates IV,
L.P., WPG Corporate Development Associates IV (Overseas),
Ltd., Weiss, Peck & Greer, as trustee under Craig Whiting IRA,
Peter B. Pfister, Weiss, Peck & Greer as Trustee under Nora
Kerppola IRA, Westpool Investment Trust, PLC, Eugene M.
Matalene, Jr., Richard Hochman, and Glenbrook Partners, L.P.
(collectively the "WPG Affiliated Entities").(11)
10.35 WPG Release Agreement dated as of June 17, 1997 between the
Company and the WPG Affiliated Entities.(11)
10.36 Fourth Amendment to Loan and Security Agreement among LaSalle,
BTCC, Congress, CIT, Finova and EII.(23)
10.37 Fifth Amendment to Loan and Security Agreement among LaSalle,
BTCC, Congress, CIT, Finova and EII.(24)
10.38 Sixth Amendment to Loan and Security Agreement among LaSalle,
Congress, CIT, Finova and EII.(25)
10.39 First Amendment dated January 22, 1998 to the Warrant
Agreement dated June 17, 1997 between Empire of Carolina, Inc.
and the holders from time to time of the Warrants.(23)
10.40 Share Purchase Agreement by and between the Shareholders of
Apple Sports, Inc. and the Shareholders of Apple Golf Shoes,
Inc. as Sellers and Empire of Carolina, Inc. as Purchaser,
dated April 10, 1997. (26)
10.41 Empire of Carolina, Inc. 1998 Stock Option Plan. (26)
10.42 Loan and Security Agreement dated May 27, 1998 among LaSalle
National Bank and Apple Sports, Inc.(27)
10.43 Loan and Security Agreement dated May 27, 1998 among LaSalle
National Bank and Apple Golf Shoes, Inc.(27)
10.44 Loan and Security Agreement dated May 27, 1998 among LaSalle
National bank and Dorson Sports, Inc.(27)
10.45 Seventh Amendment to Loan and Security Agreement dated
November 11, 1998.(28)
10.46 Eighth Amendment to Loan and Security Agreement (the
"Agreement" with LaSalle National Bank, Finova Capital
Corporation and Congress Financial Corporation (Central).(29)
10.47 Amended, Restated and Consolidated Loan and Security Agreement
by and between LaSalle National Bank, Finova Capital
Corporation and Congress Financial Corporation (Central) as
Lenders and Apple Sports, Inc., Apple Golf Shoes, Inc., and
Dorson Sports, Inc., as Borrowers.(29)
21 Subsidiaries of the Company.(27)
27 Financial Data Schedule.
(1) Previously filed as an exhibit to Clabir's Current Report on Form 8-K,
dated December 23, 1988 (File No.1-7769) and incorporated by reference.
(2) Previously filed as an exhibit to the Company's Registration Statement
on Form S-4 (File No. 33-32186, dated November 17, 1989 and
incorporated by reference.
(3) Previously filed as an exhibit to the Company's Current Report on Form
8-K, dated October 6, 1992 and incorporated by reference.
(4) Previously filed as an exhibit to the Company's Current Report on Form
8-K, dated February 1, 1993 and incorporated by reference.
13
<PAGE>
(5) Previously filed as an exhibit to the Company's Current Report on Form
8-K, dated September 30, 1994 and incorporated by reference.
(6) Previously filed as an exhibit to the Company's Current Report on Form
8-K, dated July 21, 1995 and incorporated by reference.
(7) Previously filed as an exhibit to the Company's Annual Report on Form
10-K for the year ended December 31, 1995 and incorporated by
reference.
(8) Previously filed as an exhibit to the Company's Annual Report on Form
10-K/A for the year ended December 31, 1996 and incorporated by
reference.
(9) Previously filed as an exhibit to Amendment No. 1 to the Company's
Annual Report on Form 10-K for the year ended December 31, 1994 and
incorporated by reference.
(10) Previously filed as an exhibit to the Company's Current Report on Form
8-K, dated September 12, 1996 and incorporated by reference.
(11) Previously filed as an exhibit to the Company's Current Report on Form
8-K, dated June 17, 1997 and incorporated by reference.
(12) Previously filed as an exhibit to the Company's Registration Statement
on Form S-1 (File No. 2-73208), dated July 13, 1981 and incorporated by
reference.
(13) Previously filed as an exhibit to the Company's Current Report on Form
8-K, dated May 8, 1997 and incorporated by reference.
(14) Previously filed as an appendix to the Company's definitive Proxy
Statement filed with the Commission on August 27, 1996 and incorporated
by reference.
(15) Previously filed as an exhibit to the Company's Quarterly Report on
Form 10-Q for the quarter ended June 30, 1994 and incorporated by
reference.
(16) Previously filed as an exhibit to Amendment No. 1 to Schedule 13D filed
by the WPG Group, dated December 23, 1994 and incorporated by
reference.
(17) Previously filed as an exhibit to Amendment No. 1 to Schedule 13D filed
by WPG Corporate Development Associates IV., L.P., WPG Private Equity
Partners, L. P., WPG Corporate Development Associates IV (Overseas),
L.P., WPG Private Equity Partners (Overseas), L.P., Steven Hutchinson,
Wesley Lang, Peter Pfister, Craig Whiting, Nora Kerppola, Glenbrook
Partners, L.P., Prim Ventures, Inc., Westpool Investment Trust PLC and
Weiss, Peck & Greer with the Securities and Exchange Commission on
December 23, 1994, and incorporated by reference.
(18) Previously filed as an exhibit to the Company's Registration Statement
on Form S-1 for (Reg. No.333-4440) declared effective by the Commission
on June 25, 1996 and incorporated by reference.
(19) Previously filed as an exhibit to the Company's Current Report on Form
8-K, dated December 11, 1996 and incorporated by reference.
(20) Previously filed as an exhibit to the Company's Current Report on Form
8-K, dated February 5, 1997 and incorporated by reference.
14
<PAGE>
(21) Previously filed as an exhibit to the Company's Current Report on Form
8-K, dated May 1, 1997 and incorporated by reference.
(22) Previously filed as an exhibit to the Company's Quarterly Report on
Form 10-Q for the quarter ended March 31, 1997 and incorporated by
reference.
(23) Previously filed as an exhibit to the Company's Current Report on Form
8-K, dated March 30, 1998 and incorporated by reference.
(24) Previously filed as an exhibit to the Company's Current Report on Form
8-K, dated August 25, 1997 and incorporated by reference.
(25) Previously filed as an exhibit to the Company's Current Report on Form
8-K, dated March 31, 1998 and incorporated by reference.
(26) Previously filed as an exhibit to the Company's Proxy Statement
pursuant to Section 14(A) of the Securities Exchange Act of 1934 as
filed with the Securities and Exchange Commission on April 28, 1998 and
incorporated by reference.
(27) Previously filed as an exhibit to the Company's Quarterly Report on
Form 10-Q for the quarter ended June 30, 1998 and incorporated by
reference.
(28) Previously filed as an exhibit to the Company's Quarterly Report on
Form 10-Q for the quarter ended September 30, 1998 and incorporated by
reference.
(29) Previously filed as an exhibit to the Company's Current Report on Form
8-K dated March 9, 1999 and incorporated by reference.
(b) The following reports on Form 8-K have been filed by the Company during
the last quarter of the period covered by this report:
Form 8-K filed March 26, 1999 (relating to the Eighth Amemdment to
Loan and Security Agreement and Amemded, Restated and Consolidated Loan and
Security Agreement of the Apple Companies.)
15
<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.
EMPIRE OF CAROLINA, INC.
/s/ William H. Craig
-----------------------------------
William H. Craig
Chief Financial Officer
Dated: May 19, 1999
------------
16
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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<NAME> FDS -- EMPIRE CAROLINA, INC.
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