SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Amendment No. 1
FORM 10-K/A
( MARK ONE )
X ANNUAL REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1995
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 Number
0-3305
NCC INDUSTRIES, INC.
(Exact name of Registrant as specified in its charter)
Delaware 62-0643336
(State or other jurisdiction of (
I.R.S. Employer
incorporation of organization)
Identification No.)
165 Main Street, Cortland, New York 13045-5428
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 607-756-2841
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
None None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $1.00 par value per share
(Title of Class)
Indicate by check mark whether 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 Registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained
herein, and will not be contained, to the best of Registrant's
knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form l0-K or any
amendment to this Form 10-K. X
The aggregate market value of the voting stock held by
non-affiliates of Registrant as of March 29, 1996 was
$2,608,168.
At March 29, 1996, there were outstanding 4,375,492
shares of Registrant's Common Stock, par value $1.00 per
share.
Documents Incorporated by Reference: None
Part I
Item 1. Business.
General
NCC Industries, Inc. (hereinafter referred to as
"Registrant") is engaged in the foundation garment business, which
consists of the design, manufacture and sale of brassieres,
panties and girdles.
On April 26, 1995, Maidenform Worldwide, Inc. ("Worldwide")
acquired approximately 92.4% of the common stock of Registrant
from Triumph International Overseas, Limited, a Liechtenstein
corporation ("Triumph"), Guenther Spiesshofer and Frank Magrone,
Registrant's Executive Vice President (the "Acquisition").
Following the closing of this Acquisition, Worldwide contributed
all of the purchased shares of Registrant's common stock to
Maidenform, Inc.("Maidenform"), a wholly owned subsidiary of
Worldwide. Simultaneously, Triumph purchased, along with Mr.
Magrone, approximately 28% of the outstanding shares of Class A
common stock of Worldwide and, therefore, Triumph remains a
related party to Registrant. Concurrent with the consummation
of the Acquisition, all members of Registrant's Board of
Directors (with the exception of Mr. Magrone) resigned and the
current board members were elected to replace the resigning
directors.
Classes of Similar Products
The revenues from sales of brassieres and panties and
girdles during the years ended December 31, 1995, 1994 and
1993 were as follows:
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Year Ended December 31
1995 1994 1993
Net Percent Net Percent Net Percent
Sales of Sales of Sales of Sales
Sales Sales
Brassieres $116,221,240 92.2% $117,793,706 92.0% $101,866,614 92.1%
Panties and
Girdles 9,766,086 7.8% 10,248,716 8.0% 8,731,168 7.9%
$125,987,326 100.0% $128,042,422 100.0% $110,597,782 100.0%
</TABLE>
Sales
Most of the items manufactured by Registrant are
popularly priced, but Registrant manufactures some budget
priced and higher priced items. Sales are made to department,
specialty, discount and chain stores throughout the United
States.
Registrant owns the following trademarks: "Lilyette,"
"Minimizer," and "Reflections." In addition, Registrant
manufactured brassieres as a contractor under the trademark
"Bill Blass". Registrant has been notified by a customer that
the "Bill Blass" program has been terminated. This program
accounted for approximately 14% of Registrant's total sales in
1995. (See item 7. Management's Discussion and Analysis of
Financial Conditions and Results of Operations.) Registrant's
management believes that this customer will at least partially
replace this volume with products in Registrant's current
manufacturing lines. Registrant holds a non-exclusive license
to manufacture brassieres under the trademark "Revlon".
Registrant holds no other trademarks, patents, licenses,
franchises or concessions which it deems material. During
1995, approximately 63% of Registrant's total sales were made
under Registrant's trademarks (as compared to 61% in 1994 and
1993), and substantially all the balance of sales were made
either under customers' names or as unbranded merchandise.
Sales of Registrant's trademarked products are made by 23
sales persons who are full time employees of Registrant and by
five independent regional sales representatives. Sales of
Registrant's unbranded and customers' named merchandise are
handled by account executives of Registrant. During 1995,
approximately 14% of Registrant's total sales were made to
Walmart, Inc. ("Walmart") (as compared to 18% in 1994 and 16%
in 1993), approximately 16% of the total sales were made to
J.C. Penney Company, Inc. ("Penney") (as compared to 17% in
1994 and 20% in 1993), approximately 4% of the total sales
were made to Mast Industries, Inc. ("Mast") (as compared to
10% in 1994 and 8% in 1993) and approximately 11% of total
sales were made to Mervyn's Department Stores, Inc.
("Mervyn's)(as compared to 9% in 1994 and 1993). Registrant
has no contracts or agreements with any of Walmart, Penney,
Mast, or Mervyn's with respect to purchase of merchandise
other than standard purchase orders. Although Registrant has
made substantial sales to Penney and Mervyn's for many years,
to Walmart since 1990, and to Mast since 1989 there can be no
assurance that Penney, Walmart, Mast or Mervyn's will continue
to purchase Registrant's products in the future. The loss of
any of Penney, Walmart, Mast or Mervyn's as a customer, or a
substantial decrease in their purchase of Registrant's
products, could have a materially adverse effect on
Registrant's business. Registrant does not engage in
significant sales in foreign markets.
Manufacturing Facilities and Purchases of Finished Goods
Registrant manufactures a portion of its products in
Registrant's plant located in Aguada, Puerto Rico. Registrant
also utilizes certain manufacturing facilities of both
Maidenform and Triumph and certain of Maidenform's affiliates
in the Caribbean, Mexico and Central America, and Triumph's
affiliates in the Far East and South America (see "Item 13.
Certain Relationships and Related Transactions") and utilizes
independent sewing contractors located in the United States,
the Dominican Republic,
El Salvador and Colombia. During 1993, 1994 and 1995,
Registrant significantly expanded its relationship with an
independent sewing contractor in the Dominican Republic.
Registrant provided loans to such contractor in the aggregate
principal amount of $1,950,000 to finance the expansion of its
facilities to accommodate such increased demand by Registrant.
The principal amount of such loans, together with interest at
the prime rate is repayable to Registrant with each shipment
of finished products to Registrant. A predetermined amount
per garment is deducted from such contractors invoice and
applied first, to interest income, and second to the principal
balance of the total. At December 31, 1995, the aggregate
outstanding principal balance of the loans were $887,834.
With regard to Registrant's utilization of Maidenform's and
Triumph's manufacturing facilities or those of independent
contractors, Registrant operates in three ways. Registrant
cuts raw materials in its plant in Cortland, New York and
ships such cut materials to the Far East, South America,
Puerto Rico and the Dominican Republic for assembly by
Triumph's or Maidenform's respective affiliate, or by a
licensee, or by independent contractor. The finished products
are returned to Registrant for finishing, packaging and sale
to customers. Registrant sends raw materials to Maidenform's
cutting facility in Jacksonville, Florida, who then cuts the
material and ships such cut materials to any of the same
affiliates, licensees or contractors for assembly. In
addition, Registrant purchases finished goods from Triumph and
its affiliates most of which are manufactured in the Far East.
The Registrant's foreign manufacturing operations are subject
to the risks of doing business abroad, including increased
transit time due to documentation and customs clearance
requirements, import controls, trade barriers (including
quotas), restrictions on the transfer of funds, burdens of
complying with foreign laws, as well as political and economic
instability in the countries in which it operates.
In March 1996, Registrant made a decision to close its
subsidiary's two leased Puerto Rican manufacturing facilities
and subsequent to that date began a process of notification of
employees and the government of Puerto Rico. Although the
government of Puerto Rico has made offers to Registrant to
retain the facility which Registrant's management is
considering, management believes that the facility will be
closed and its sewing assembly operations will be transferred
to other locations.
Registrant's management believes that all equipment from
these facilities will be used at other locations; however, the
leases on these facilities, which have combined annual rental
of approximately $94,000, (representing individual annual
rentals of approximately $59,750 and $34.250 do not expire
until 1999 and 2002 respectively. Registrant's management has
not determined the total expected cost of the closure which
will be recorded in 1996.
Sources of Raw Materials
Registrant purchases its raw materials from various
domestic suppliers. Three suppliers account for approximately
30% of the raw materials used by Registrant; however,
Registrant believes adequate alternative sources are
available for all its raw materials needs.
Working Capital
Historically, raw materials have been readily available
from a number of suppliers and it has not been necessary for
Registrant to maintain a substantial inventory in order to
fill orders. Registrant has been required to maintain higher
work-in-process inventories than other domestic manufacturers
because a substantial portion of the products that it
manufactures is cut at Registrant's main plant in the United
States, shipped to manufacturing facilities outside the
continental United States for sewing and then returned for
finishing, packaging and sale. In addition, since Registrant
has experienced long lead times in obtaining merchandise from
the Far East and South America, Registrant carries higher
inventories of finished goods to meet its shipment obligations
to customers. Registrant endeavors to utilize its domestic
production capacity to meet the short-term needs of its
customers. Registrant believes that its practices with
respect to working capital items are consistent with industry
practices of companies whose manner of production, shipment
levels or manufacturing sites, as the case may be, are similar
to Registrant's.
Backlog
Registrant's management estimates the dollar amounts of
backlogs of unfilled orders as of December 31, 1995 and
December 31, 1994 were $9,719,000 and $12,200,000,
respectively. Registrant's management believes that all
orders received and unfilled as of December 31, 1995 are firm
and will be filled within the current fiscal year.
Competitive Conditions
Marketing efforts by Registrant during 1995 involved
mainly catalog and newspaper advertising of its products,
including cooperative advertising.
While many factors can affect success in the marketplace,
those which affect Registrant's product lines include price,
cost, quality, style, color, fit and material content.
Registrant's management believes that no single factor
materially affects its competitive abilities. Registrant
endeavors to use creative approaches in the design,
manufacture and marketing of its products, and to combine
these elements in a manner which Registrant deems suitable for
success.
Management estimates that during 1995 sales by Registrant
accounted for approximately 8% of all domestic sales of
brassieres, panties and girdles. In the opinion of
management, there are at least five companies, including
Maidenform, which are of larger size and which sell more
brassieres, panties and girdles to the retail industry in the
United States than does Registrant.
Employees
At December 31, 1995, Registrant employed 1767 persons,
of whom 1346 were production employees. The remainder of such
employees were engaged in sales, distribution, design and
administrative activities. As a result of an organization
campaign, Union Needletrade Industrial Textile Employees
("UNITE") is now recognized as the collective bargaining agent
and representative of certain production workers at the
Cortland facilities. UNITE has demanded the right to
negotiate a contract, and Registrant has entered into
negotiations with the union. Approximately 30% of the
Registrant's employees will be covered by such a contract.
Item 7. Management's Discussion and Analysis of Financial
Condition and
Results of Operations.
Liquidity and Capital Resources
Registrant's working capital decreased to
$31,673,000 at December 31, 1995 from $35,149,000 at
December 31, 1994 primarily due to repayment of long term
debt of $7,000,000 offset by net income of $2,75l,000.
Registrant participates in the consolidated cash
management system of its ultimate parent, Worldwide, and
its subsidiaries, including Maidenform and the
Registrant, (collectively "the Maidenform Group"). As
such, Registrant is a party to, and its liquidity is
dependent upon the Maidenform Group's financing
arrangements. In 1995, the Maidenform Group entered into
a revolving credit facility for $120,000,000 coupled with
a $50,000,000 term loan, and $30,000,000 in senior notes,
in connection with each of which Registrant's assets and
stock are pledged as collateral.
Under the revolving credit facility, the Maidenform Group
may borrow, repay, and reborrow through April 25, 1998,
the facility expiration
date; however, borrowings are limited to certain
percentages of the Maidenform Group's trade accounts
receivable and inventories.
As of December 31, 1995, outstanding borrowings
under the revolving credit facility amounted to
$81,000,000. In addition, outstanding letters of credit
(which reduce the maximum available borrowing) issued by
the bank for the account of the Maidenform Group under
the facility amounted to approximately $3,000,000. In
January and February 1996, the Maidenform Group borrowed
the remaining $36,000,000 available under the facility.
On March 29, 1996, the bank loan agreement was amended
to and Worldwide borrowed an additional $20,000,000 under a
new term loan, of which $10,000,000 is repayable on
August 15, 1996 and $5,000,000 is repayable on each of
October 30 and November 30, 1996. All of the proceeds of
this new loan were utilized to pay down certain trade
payables of the Maidenform Group.
Registrant's management believes that the Maidenform
Group's line of credit and debt capacity, together with
continued vendor support are adequate to meet its
anticipated operating needs. As of December 31, 1995,
Registrant did not have any material commitments for
capital expenditures.
Cash flows provided by operations, for the year
ended December 31, 1995 were $19,765,000 representing an
increase of $4,350,000 as compared to the year ended
December 31, 1994. This increase was primarily due to an
increase in Accounts Payable in 1995 of $13,066,000 as
compared to an increase in Accounts Payable in 1994 of
$1,880,000 and a decrease in other assets in 1995 of
$1,226,000 primarily due to repayment during 1995 of the
third party contractor loan, and the change in recording
investments ($671,382) previously thought to be held to maturity,
but at December 31, 1995, were designated to be sold.
Such investments were primarily fully-insured United
States government securities (GNMAs, FNMAs, and FHLMCs)
and mutual funds which were backed by fully-insured
United States government securities (GNMAs, FNMAs, and
FHLMCs). This increase was partially offset by an
increase in inventory of $5,916,000 in 1995 as compared
to an decrease in inventory of $9,012,000 in 1994. In
connection with the Acquisition, Registrant's previous
long and short term bank debt was paid in full by the
Maidenform Group as an advance from some of the proceeds
of the current bank agreements. (From the date of such
repayment by Maidenform through December 31, 1995, the
Registrant had paid an aggregate of $13,894,000 to
Maidenform as repayment for such advances. At such date,
approximately $5.9 million of such advances was
outstanding). Cash flows provided by operations for the
year ended December 31, 1994 were $15,415,000,
representing an increase of $21,582,000 as compared to
the year ended December 31, 1993. This increase was due
to a decrease in inventory in 1994 of $9,012,000 as
compared to an increase in inventory in 1993 of
$13,514,000. Such decrease resulted primarily from
higher shipments in 1994 as compared to lower than
anticipated shipments in 1993.
Cash used in investing activities for 1995 was
$630,000 representing a decrease of $674,000 in 1995 as
compared to 1994. This decrease was primarily due to a
reduction in purchase of plant and equipment of $606,000.
Cash used in investing activities for 1994 was $1,304,000
representing a decrease of $3,770,000 in 1994 as compared
to 1993. This decrease was primarily due to a reduction
in purchases of plant and equipment of $1,954,000 and a
reduction in loans to an independent sewing contractor of
$1,579,000. Cash used in financing activities in 1995
was $19,445,000 representing an increase of $5,916,000 in
1995 as compared to 1994 due to repayment of bank debt
by Registrant from funds received from Maidenform. Cash
used in financing activities in 1994 was $13,529,000
representing an increase of $23,527,000 in 1994 as
compared to 1993 due to a reduction in net borrowings of
$13,081,000 in 1994 whereas Registrant's net borrowings
increased $10,481,000 in 1993.
Results of Operations
Net sales for 1995 were approximately 2% lower than
in 1994, principally due to a decrease in demand for
Registrant's products primarily at Walmart and Mast,
partially offset by strength in the Lilyette brand.
Registrant's management believes that these customers
will at least partially replace this volume with the
products in Registrant's current manufacturing lines. As
of March 31, 1995, the impact of the cancellation of the
Bill Blass trademark merchandise has resulted in a 48%
reduction of sales of Bill Blass merchandise to Walmart,
Registrant's sole customer of such merchandise. While
the cancellation of the Bill Blass trademark continues to
affect comparative results, Walmart has partially
replaced this lost business with new "Kathy Lee"
trademarked styles, resulting in a net decrease of 20% of
total sales to Walmart for the second quarter of 1996 as
compared to the second quarter of 1995. Registrant's
management anticipates continued moderate partial
recovery of sales to Walmart in the second half of 1996.
Net sales for 1994 were approximately 16% higher than in
1993, principally due to an increase in demand for
Registrant's products. Unit volume of goods sold
decreased 1% from 1994 to 1995 and increased 12% from
1993 to 1994. Sales mixture (a weighted average of
revenue per unit, taking into account the sales levels of
Registrant's various products and styles of products)
resulted in a decrease in the average revenue per unit
sold of less than 1% in 1995 over 1994 and a 2% increase
of the average revenue per unit sold in 1994 over 1993.
Gross margin decreased to $28,185,000 for the year
ended December 31, 1995 from $32,539,000 in 1994 and
$28,446,000 in 1993. The gross margin percentage to net
sales decreased to 22.4% in 1995 from 25.4% in 1994. The
gross margin percentage to net sales decreased slightly
to 25.4% in 1994 from 25.7% in 1993. Shipping and
general and administrative expenses as a percentage of
net sales were generally consistent for the years ended
December 31, 1995, 1994 and 1993. Selling and
advertising expenses were consistent for the years ended
December 31,1995 and 1994 and decreased as a percentage
of net sales for the year ended December 31, 1994 as
compared to the year ended December 31, 1993 because of
the non-recurrence in 1994 of expenditures related to a
national advertising campaign promoting one of
Registrant's related brands in 1993. Interest expense
for 1995 was 15% higher than in 1994 due to higher
interest rates partially offset by lower average
borrowings. Interest expense was generally consistent
for 1994 and 1993.
Registrant's effective tax rate was generally
consistent in 1995, 1994 and 1993.
As a result of the above factors, Registrant's net
income decreased 54% in 1995 as compared to 1994 and
increased 58.9% in 1994 as compared to 1993.
In March 1996, the Registrant made a decision to
close its leased facilities in Puerto Rico. See Note 13
to the Financial Statements.
PART III
Item 12. Security Ownership of Certain Beneficial
Owners and Management.
(a) The following table sets forth certain information
with respect to persons known to Registrant to own
beneficially more than 5% of Registrant's voting securities,
as of March 29, 1996.
Percent of
Amount and Out-
Nature of standing
Title of Name and Address of Beneficial Shares
Class Beneficial Owner Ownership (1) Owned (2)
Common Stock, Maidenform, Inc(3) 4,042,779 92.4%
$1 par value 154 Avenue E
Bayonne, NJ
Elizabeth Coleman(3) 4,049,471 92.5%
72 Westminster Drive
Atlanta, GA
(1) All persons listed have sole voting and investment power
with respect to their shares unless otherwise indicated.
(2) Computed on the basis of 4,375,492 shares of Common Stock
outstanding.
(3) Maidenform is the record owner of 4,042,779
shares of Common Stock. As the sole shareholder of
Maidenform, Worldwide beneficially owns indirectly
through Maidenform, such 4,042,779 shares of Common
Stock. Elizabeth Coleman, as a result of her
direct and indirect ownership of the capital stock
of Worldwide and certain voting rights and powers
with respect to the selection of and decision-
making by the Board of Directors of Worldwide, may
be deemed to beneficially own the 4,042,779 shares
of Common Stock indirectly beneficially owned by
Worldwide. Ms. Coleman disclaims the beneficial
ownership of all such shares. The amount shown
includes 6,692 shares purchased by Ms. Coleman from
one of Registrant's shareholders.
(b) The following table sets forth certain
information with respect to each class of
Registrant's equity securities beneficially owned
by each director and each executive officer named
in the Summary Compensation Table of Registrant and
the directors and executive officers of Registrant
as a group, as of March 29, 1996
Percent of
Amount and Out-
Nature of standing
Title of Name and Address of Beneficial Shares
Class Beneficial Owner Ownership (1) Owned (2)
Common Stock, Elizabeth Coleman(3) 4,049,471 92.5%
$1 par value
David Masket - -
Steven Masket - -
Ira Glazer - -
Frank Magrone - -
All executive officers
and directors as a
group (5 in number) 4,049,471 92.5%
(1) All persons listed have sole voting and investment power
with respect to their shares unless otherwise indicated.
(2) Computed on the basis of 4,375,492 shares of Common Stock
outstanding.
(3) Maidenform is the record owner of 4,042,779 shares of
Common Stock. As the sole shareholder of Maidenform,
Worldwide beneficially owns indirectly through Maidenform,
such 4,042,779 shares of Common Stock. Elizabeth Coleman,
as a result of her direct and indirect ownership of the
capital stock of Worldwide and certain voting rights and
powers with respect to the selection of and decision-
making by the Board of Directors of Worldwide, may be
deemed to beneficially own the 4,042,779 shares of Common
Stock indirectly beneficially owned by Worldwide. Ms.
Coleman disclaims the beneficial ownership of all such
shares.
Report of Independent Auditors
Shareholders and Board of Directors
NCC Industries, Inc.
We have audited the accompanying consolidated balance sheet of NCC
Industries, Inc. and subsidiary as of December 31, 1995, and the
related consolidated statements
of income, shareholders' equity, and cash flows for the year then
ended. Our audit also included the information related to 1995 on the
financial statement schedule on page F-20 of this Form 10-K. These
financial statements and schedule are the responsibility of the
Company's management. Our responsibility is to express an opinion on
these financial statements and schedule based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe
that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial position
of NCC Industries, Inc. and subsidiary at December 3l, 1995, and the
consolidated results of their operations and their cash flows for the
year then ended, in conformity with generally accepted accounting
principles. Also, in our opinion, the related financial statement
schedule, when considered in relation to the basic financial statements
taken as a whole, presents fairly in all material respects the
information set forth therein.
Ernst & Young LLP
Syracuse, New York
February 16, 1996, except for Notes 4 and
13 as to which the date is March 29,1996
F-1
Report of Independent Auditors
Shareholders and Board of Directors
NCC Industries, Inc.
We have audited the accompanying consolidated balance sheet of NCC
Industries, Inc. and subsidiary as of December 31, 1994 and the
related consolidated statements of income, shareholders' equity and
cash flows for each of the two years in the period ended December 31,
1994. These consolidated financial statements are the responsibility
of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our
audits.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We
believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial position
of NCC Industries, Inc. and subsidiary at December 31, 1994, and the
consolidated results of their operations and their cash flows for each
of the two years in the period ended December 31, 1994, in conformity
with generally accepted accounting principles.
Coopers & Lybrand LLP
Syracuse, New York
February 3, 1995
F-2
NCC INDUSTRIES, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
___________
<TABLE>
<S> <C> <C>
ASSETS
December 31,
1995 1994
Current assets:
Cash and cash equivalents $ 725,198 $ 1,034,820
Investments 671,382 -
Accounts receivable, less allowance
for doubtful accounts of $432,000
in 1995 and $350,000 in 1994 15,864,241 16,448,704
Inventories 45,020,477 39,104,654
Prepaid expenses 288,247 396,012
Income taxes refundable - 99,042
Deferred taxes 2,058,824 1,507,863
Total current assets 64,628,369 58,591,095
Property, plant and equipment, net 10,155,629 11,186,318
Other assets 584,744 1,810,590
Total assets $75,368,742 $71,588,003
The accompanying notes are an integral part
of the consolidated financial statements.
F-3
</TABLE>
<TABLE>
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
December 31,
1995 1994
Current liabilities:
Notes payable, banks $ - $12,000,000
Accounts payable 15,638,193 5,352,165
Accrued expenses 5,795,273 3,112,645
Due to affiliates 11,077,154 2,532,502
Current portion of long-term debt 445,000 445,000
Total current liabilities 32,955,620 23,442,312
Long-term debt, less current portion 1,916,415 2,361,415
Long-term notes payable, bank - 7,000,000
Deferred taxes 309,203 628,053
Other liabilities 1,355,753 2,172,575
Total liabilities 36,536,991 35,604,355
Shareholders' equity:
$7 cumulative preferred stock, $1 par value;
authorized 500,000 shares;
issued and outstanding - none
Common stock, $1 par value,
authorized 10,000,000 shares,
issued 4,866,841 shares 4,866,841 4,866,841
Additional paid-in capital 5,077,911 5,077,911
Retained earnings 31,645,396 28,894,732
Minimum pension liability ( 75,369) ( 172,808)
Less:
Common stock in treasury, 491,349 shares
at cost ( 2,683,028) ( 2,683,028)
Total shareholders' equity 38,831,751 35,983,648
Total liabilities and shareholders' equity $75,368,742 $71,588,003
F-4
NCC INDUSTRIES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
___________
Years Ended December 31,
1995 1994 1993
Net sales $125,987,326 $128,042,422 $110,597,782
Cost and expenses:
Cost of sales 97,802,166 95,503,504 82,151,733
Shipping, selling,
general and administrative 22,507,559 22,674,374 21,709,190
Interest, net 1,873,822 1,634,346 1,670,443
122,183,547 119,812,224 105,531,366
Income before income taxes 3,803,779 8,230,198 5,066,416
Income taxes:
Current:
Federal 1,616,442 1,923,221 1,386,234
State and local 306,485 265,849 247,174
Deferred ( 869,812) 140,116 ( 281,791)
1,053,115 2,329,186 1,351,617
Net income $2,750,664 $5,901,012 $3,714,799
Income per common share $.63 $1.35 $.85
Weighted average number of shares 4,375,563 4,375,563 4,379,721
The accompanying notes are an integral part
of the consolidated financial statements.
</TABLE>
F-5
<TABLE>
<S> <C> <C> <C> <C>
NCC INDUSTRIES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1995, 1994, AND 1993
Common Stock Additional Minimum Treasury Stock
Number of Paid-In Retained Pension Number
Shares Issued Amount Capital Earnings Liability Shares Amount
Balance, December 31,1992 4,866,841 $4,866,841 $5,077,911 $19,278,921 486,174 ($2,641,903)
Net income $ 3,714,799
Purchase of treasury 4,775 ($
stock 38,025)
Minimum pension ($103,558
liability
Balance, December 31, 1993 4,866,841 $4,866,841 $5,077,911 $22,993,720 ($103,558) 490,949 ($2,679,928)
Net income
$5,901,012
Purchase of treasury 400 ($
stock 3,100)
Minimum pension ($69,250)
liability
Balance, December 31, 1994 4,866,841 $4,866,841 $5,077,911 $28,894,732 ($172,808) 491,349 ($2,683,028)
Net income $ 2,750,664
Purchase of treasury
stock
Minimum pension $ 97,439
liability
Balance, December 31, 1995 4,866,841 $4,866,841 $5,077,911 $31,645,396 ($75,369) 491,349 ($2,683,028)
The accompanying notes are an integral part of the consolidated financial
statements.
F-6
</TABLE>
NCC INDUSTRIES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
___________
Increase (Decrease) in Cash
<TABLE>
<S> <C> <C> <C>
Years Ended December 31,
1995 1994 1993
Cash flows from operating activities:
Net income $2,750,664 $5,901,012 $3,714,799
Adjustments to reconcile net income
to net cash provided by (used in)
operating activities:
Depreciation l,527,346 1,466,132 1,242,357
Amortization 19,440 22,765 25,897
Deferred income taxes ( 869,812) 140,116 ( 281,791)
Provision for losses
on accounts receivable 108,000 (16,447) 72,400
Loss on retirement
of plant and equipment 32,865 58,550 35,465
Changes in operating
assets and liabilities:
Accounts receivable 476,463 ( 4,078,586) 2,180,435
Inventories ( 5,915,823) 9,011,729 (13,514,288)
Prepaid expenses 107,765 (65,932) 121,029
Income taxes refundable/payable 99,042 133,250 ( 51,037)
Other assets 635,024 173,267 202,321
Accounts payable
and accrued expenses 13,066,094 1,879,566 ( 171,768)
Due to affiliate 8,544,652 544,646 ( 235,313)
Other liabilities ( 816,822) 245,309 492,623
Net cash (used in) provided
by operating activities 19,764,898 15,415,377 ( 6,166,871)
Cash flows from investing activities:
Purchase of plant and equipment ( 563,601) ( 1,170,042) ( 3,133,830)
Proceeds from sales of fixed assets 34,081 16,500 -
Increase in
short-term investments - ( 200,548)
Funds issued for supplier
note receivable ( 100,000) ( 150,000) ( 1,739,589)
Net cash used in
investing activities ( 629,520) ( 1,303,542) ( 5,073,967)
(Continued)
F-7
NCC INDUSTRIES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
___________
Increase (Decrease) in Cash
Years Ended December 31,
1995 1994 1993
Cash flows from financing activities:
Payments to acquire treasury stock $ - ($ 3,100) ($ 38,025)
Repayment of long-term debt ( 445,000) ( 445,000) ( 445,000)
Net (repayment) borrowings
under notes payable, banks ( 19,000,000) ( 13,081,000) 10,481,000
Net cash (used in) provided by
financing activities ( 19,445,000) ( 13,529,100) 9,997,975
Net (decrease) increase in cash ( 309,622) 582,735 ( 1,242,863)
Cash and cash equivalents,
beginning of year 1,034,820 452,085 1,694,948
Cash and cash equivalents,
end of year $ 725,198 $ 1,034,820 $ 452,085
Supplemental disclosures of cash flow information (see Note 1):
Cash paid during the year for:
Interest $ 1,173,235 $ 1,631,230 $1,645,747
Income taxes 251,553 2,271,231 1,572,823
The accompanying notes are an integral part
of the consolidated financial statements.
F-8
NCC INDUSTRIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
___________
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Business
The Company is engaged in the garment business, in which it
manufactures and distributes (predominantly to retail
businesses) popular priced ladies under-garments. Sales are made
to department, specialty and chain stores throughout the United
States. Triumph International Overseas Ltd., a Liechtenstein
corporation ("Triumph"), was the Company's majority shareholder
until April 26, 1995, when Triumph sold its interest, and who, at
December 31, 1994 owned approximately 84% of the outstanding
shares. Maidenform Worldwide, Inc., ("Worldwide") a Delaware
corporation, is the Company's ultimate majority shareholder by
ownership of Maidenform Inc. ("Maidenform"), the Company's
controlling shareholder, who, at December 3l, 1995 owned
approximately 92% of the Company's outstanding common shares.
Use of Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
Principles of Consolidation
The consolidated financial statements include the accounts of the
Company and its wholly-owned subsidiary. All significant
intercompany accounts and transactions have been eliminated.
Cash and Cash Equivalents
The Company considers all highly liquid investments with a
maturity of three months or less when purchased to be cash
equivalents.
Investments
In May 1993, Statement of Financial Accounting Standards No. 115,
"Accounting for Certain Investments in Debt and Equity
Securities", was issued by the Financial Accounting Standards
Board. As permitted, the Company implemented this Standard on
January 1, 1994. The effect of the adoption was immaterial to
the Company. Investments, which are classified as available - for-
sale securities, consist primarily of United States government
securities (GNMAs, FNMAs, FHLMCs) and mutual funds which are
invested in exclusively United States government securities, and
are stated at market, which approximates cost. At December 31,
1995 and 1994, gross unrealized holding gains and gross
unrealized losses were immaterial. Such United States government
securities have maturities due after twenty years. At December
31, 1994, investments were included with other assets.
F-9
NCC INDUSTRIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Inventories
Inventories are stated at the lower-of-cost or market. Cost is
determined on the first-in, first-out basis.
Property, Plant and Equipment and Depreciation
Property, plant and equipment are stated at cost. Depreciation
has been computed by the straight-line method over the estimated
useful lives of the assets, as follows: building and building
improvements -l0 to 20 years and machinery and equipment - 3 to
10 years.
Revenue Recognition
The Company's policy of recognizing revenue is to record sales
upon shipment of goods.
Income Per Common Share
Per share amounts are computed based on the weighted average
number of shares of common stock outstanding.
Income Taxes
Income tax expense consists of taxes currently payable and
deferred income taxes which are based upon temporary differences
between financial accounting and tax bases of assets and
liabilities in accordance with SFAS No. 109 as measured by the
enacted tax rates which are anticipated to be in effect when
these differences reverse. The deferred tax provision is the
result of the net change in the deferred tax assets and
liabilities. A valuation allowance is established when it is
necessary to reduce deferred tax assets to amounts expected to be
realized.
Under a Tax Allocation Agreement with Maidenform, the Company files a
consolidated federal income tax return and a combined New York State
return with Maidenform. Current and deferred income tax liabilities
have been determined on a separate company basis. That is, each
member of the consolidated group will determine its respective
current and deferred income taxes as if it had not been included in a
consolidated, combined or unitary tax return. The total current tax
liabilities of the group determined on a separate company basis may
exceed taxes actually due to the respective tax authorities because
of the use of losses, (i.e. NOL) or credits of group members. To the
extent of such excess, the excess will be payable to those group
members whose losses or credits are utilized.
Other Assets
Other assets consist principally of notes receivable due from a
garment processor at December 31, 1995 and 1994 and long-term
investments at December 31, 1994. The notes bear interest at the
prime rate. Payments are made based on the billings by the processor
to the Company.
F-10
NCC INDUSTRIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
The notes are being repaid by deduction from amounts owed by
the Company to the processor for services performed. During
1995 and 1994, the Company deducted $ 453,280 and $528,920
respectively, and applied such deductions to the notes. It is
estimated that the notes will be reduced by $400,000 in 1996.
Concentration of Credit Risk
The Company performs periodic credit evaluations of its customers'
financial condition. The Company has granted credit to one
customer whose balance owed consisted of 10% of the Company's
accounts receivable at December 31, 1995 and 11% of the Company's
accounts receivable at December 31, 1994. The Company granted
credit to another customer whose balance owed consisted of less than
1% of the Company's accounts receivable at December 31,1995 and 20%
of the Company's accounts receivable balance at December 31, 1994.
The Company granted credit to a third customer whose balance owed
consisted of 10% of the Company's accounts receivable at December
31, 1995 and 5% of the Company's accounts receivable at December 31,
1994.
2. INVENTORIES
Inventories by major classifications are as follows:
1995 1994
Raw materials $ 7,566,204 $ 7,287,229
Work-in-process 10,659,170 9,639,312
Finished goods 26,795,103 22,178,113
$45,020,477 $39,104,654
3. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment at December 31, consisted of the
following:
1995 1994
Land $ 239,867 $ 239,867
Building and building 6,334,777 6,334,777
improvements
Machinery and equipment 10,201,234 9,798,420
Construction in progress 73,023 190,206
16,848,901 16,563,270
Less: Accumulated depreciation 6,693,272 5,376,952
$10,155,629 $11,186,318
F-11
NCC INDUSTRIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
___________
4. NOTES PAYABLE, BANKS
The Company participates in the consolidated cash management
system of its ultimate parent, Worldwide, and its subsidiaries
("the Maidenform Group"). As such the Company is a party to and
its liquidity is dependent upon the Maidenform Group's financing
arrangements. Substantially all of the Company's non-payroll
disbursements are controlled by the Maidenform Group. The
Maidenform Group's long term debt includes a revolving credit
facility for $120,000,000, a $50,000,000 term loan and
$30,000,000 in senior notes for which the Company's assets and
stock are pledged as collateral. Under the revolving credit
facility, the Maidenform Group may borrow, repay, and reborrow
through April 25, 1998, the facility expiration date; however,
borrowings are limited to certain percentages of the Maidenform
Group's trade accounts receivable and inventories.
As of December 31, 1995, outstanding borrowings under the
revolving credit facility amounted to $81,000,000. In addition,
outstanding letters of credit (which reduce the maximum available
borrowings) issued by the bank for the account of the Maidenform
Group under the facility amounted to $3,000,000. In January and
February 1996, the Maidenform Group borrowed the remaining
$36,000,000 available under the facility. On March 29, 1996, the
bank loan agreement was amended and the Maidenform Group borrowed
an additional $20,000,000 under a new term loan, of which
$10,000,000 is repayable on August 15, 1996 and $5,000,000 is
repayable on each of October 30 and November 30, 1996. Proceeds
of the new loan are to be used to pay trade payables.
The term loan is repayable in increasing quarterly principal
installments ranging form $2,000,000 to $3,000,000 commencing on June
30, 1996 through maturity on March 31, 2001 and also provides for
prepayments of principal (i) from the proceeds received by the
Maidenform Group in connection with certain transactions and (ii)
based on a percentage of the Maidenform Group's net cash flow, as
defined, for each of the three years ending December 31,1995 through
1997, payable no later April 30 of the following year. In addition,
the senior notes also provide for similar prepayment at the option of
the noteholders. No amounts were subject to prepayment at December
31, 1995.
The senior notes are due September 30, 2003, payable in annual
principal installments of $4,285,714 on each September 30, commencing
1997 through 2003.
Notes payable under the above described financing arrangements
are collateralized by the assets of the Maidenform Group, which
include the assets of the Company.
The above described loan agreements contain covenants that, among
other matters, restrict additional borrowings, dividends and
other payments with respect to the Maidenform Group's capital
stock and provide for the maintenance of minimum consolidated
tangible net worth, and certain financial ratios, including
current assets (excluding inventory) to current liabilities, debt
to equity, fixed charge coverage and debt to operating cash flow
ratios (all as defined). At December 31, 1995, no amounts of
retained earnings were available for dividends.
F-12
NCC INDUSTRIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
___________
4. NOTES PAYABLE, BANKS (Continued)
The Company, based on information supplied by Worldwide, believes
that these credit facilities together with continued vendor
support are sufficient for it to meet its cash flow needs.
As of December 31, 1994, the Company had long-term notes payable
of $7,000,000 with interest at rates which were periodically
negotiated (rates ranged from 6.82% to 7.49% as of December 31,
1994). At December 31, 1994, the Company also had $12,000,000
outstanding on various lines of credit. The notes payable and
lines of credit were repaid during 1995 by Maidenform (see Note
9).
5. LONG-TERM DEBT
Long-term debt at December 31, 1995, consisted of $2,361,415 Series
"A" Industrial Development Bonds (the Bonds) issued by Cortland
County Industrial Development Agency. The Bonds are tax-exempt and
bear interest at various rates based on maturity, ranging from
6.6% to 8%, and are payable on September 15 and March 15 of each
year. Annual maturities are $445,000 through 1998, $210,000 in
1999, and $205,000 thereafter, through September 15, 2003.
The Bonds are collateralized by a first mortgage on the land,
facility and certain equipment purchased with the proceeds of the
bond financing. The Bonds are also collateralized by an irrevocable
letter of credit for $2,542,068 which was issued for the account of
the Company in favor of the Bond Trustee for the benefit of the
bondholders.
The Bond Indenture requires, among other things, that the Company
maintain certain financial ratios.
6. INCOME TAXES
The temporary differences which give rise to a significant portion
of deferred tax assets and liability at December 31, 1995 and 1994
are as follows:
1995 1994
Inventory $1,415,103 $1,003,712
Accounts receivable
251,946 127,085
Depreciation (695,313) (757,354)
Accruals 853,627 563,957
Employee benefit plans 595,519 560,149
Other 65,496 41,822
2,486,378 1,539,371
Less: Valuation (736,756) (659,561)
allowance
$1,749,622 ($ 879,810)
F-13
NCC INDUSTRIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
___________
6. INCOME TAXES (Continued)
Net deferred taxes are classified as follows:
1995 1994
Current asset $2,058,824 $1,507,863
Long-term liability 309,203 628,053
$1,749,622 $ 879,810
Reconciliation of federal statutory rate to the effective income
tax rate for years ended December 31 follows:
1995 1994 1993
Statutory federal taxes 34.0% 34.0% 34.0%
State income taxes, net of
federal income tax benefit 4.8 1.8 2.5
Adjustment of the valuation allowance 1.0 .4 3.7
Section 936 incentive credit and other (12.1) ( 7.9) (13.5)
27.7% 28.3% 26.7%
7. RETIREMENT BENEFIT PLANS
Pension Plans
a. The Company has a noncontributory defined benefit pension
plan. Employees
may no longer accrue service benefits due to an amendment in
1991, but may
continue to receive service benefits for vesting purposes.
The Company
funds an amount each year that is necessary to keep the plan
on a sound
actuarial basis.
The discount rate used to determine the actuarial present
value of the
projected benefit obligation was 7.0%, 7.5% and 6.25% at
December 31,
1995, 1994 and 1993, respectively. The expected long-term rate
of return
on assets used to determine the net pension cost was 8%,8% and
7.5%
during 1995, 1994 and 1993, respectively.
F-14
NCC INDUSTRIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
___________
7. RETIREMENT BENEFIT PLANS (Continued)
A summary of the plan's funded status reconciled to the
amounts reported in
the Company's consolidated balance sheet at December 31 is as
follows:
1995 1994
Actuarial present value of benefit obligations:
Accumulated benefit obligation, including
vested benefits of $1,713,533 and
$1,571,377. ($1,720,724) ($1,585,552)
Projected benefit obligation
for service provided to date ($1,720,724) ($1,585,552)
Plan assets at fair value, primarily
cash equivalents and U. S. government
securities 1,436,380 1,193,331
Projected benefit obligation
in excess of plan assets ( 284,344) ( 392,221)
Unrecognized net loss 75,369 ( 172,808)
Accrued pension cost (208,975) (219,413)
Minimum pension liability ( 75,369) ( 172,808)
Unfunded pension liability
included in accrued expenses ($ 284,344) ($ 392,221)
1995 1994 1993
Net pension cost includes:
Interest cost $118,216 $108,896 $ 107,265
Actual return on plan (291,830) 106,687
assets (88,403)
Net amortization and 198,880 (210,793) 9,765
deferral
$ 25,266 $ 4,790 $ 28,627
b. On January 1, 1992, the Company implemented a defined
contribution plan covering all participants in the defined
benefit plan or active Continental U.S. employees age 21 or older
with one year of service except for certain executives.
Contributions to the plan are determined at the discretion of
the Board of Directors and are based on participants' age and
compensation. Salary deferrals may be made by the participants
commencing January 1, 1993. Total defined contributions costs for
1995, 1994 and 1993 were $253,500, $247,794, and $223,772,
respectively.
Postretirement Health Care and Life Insurance Plan
The Company provides for certain limited postretirement medical and
life insurance benefits covering certain employees hired prior to
December 1, 1977.
The Accumulated Postretirement Benefit Obligation was determined
using a discount rate of 7.0% and 6.5% at December 31, 1995 and
1994, respectively. The assumed healthcare cost trend rate used was
9.5% for 1995; the rate was assumed to decrease gradually to 5% by
the year 2008 and remain at that level thereafter.
F-15
NCC INDUSTRIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
___________
7. RETIREMENT BENEFIT PLANS (Continued)
A summary of the plan's funded status reconciled to the amounts
reported in the company's consolidated balance sheets at December 31,
1995 and 1994 are as follows:
1995 1994
Accumulated Postretirement
Benefit Obligation (APBO):
Retirees $ 712,830 $ 708,000
Active plan participants
fully eligible 271,467 320,600
Other active plan participants 293,920 264,500
Total APBO 1,278,217 1,293,100
Plan assets at fair value - -
APBO in excess of plan assets 1,278,217 1,293,100
Unrecognized net gain 77,536 30,200
Accrued postretirement benefit
obligation included in other
liabilities $1,355,753 $1,323,300
1995 1994 1993
Net Periodic Post-
retirement Benefit Expense:
Service cost $ 10,300 $ 12,200 $ 14,400
Interest cost 85,200 84,400 99,200
Amortization of gains in
excess of corridor (7,100) - -
Net periodic postretire-
ment benefit expense $ 88,400 $ 96,600 $113,600
A discount rate of 7.0%, 7.5% and 8% was used to determine the net
periodic postretirement benefit expense for December 31, 1995, 1994
and 1993.
Increasing the assumed healthcare cost trend rates by one percentage
point in
each year would increase the accumulated postretirement benefit
obligation as
of December 31, 1995 by $53,600 and increase the aggregate of the
service
cost and interest cost of net periodic postretirement benefit
expense by $4,800.
F-16
NCC INDUSTRIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
___________
8. COMMITMENTS
Leases
Rent expense was approximately $467,000, $262,000 and $428,000 for
the years ended December 31, 1995, 1994 and 1993, respectively.
Minimum lease commitments, exclusive of real estate taxes and
other expenses, under all noncancelable real property operating
leases at December 31, 1995 are as follows:
1996 $552,962
1997 562,148
1998 583,960
1999 561,848
2000 527,738
Thereafter 1,141,625
The leases provide for the payment of increases in real estate
taxes and other costs.
9. RELATED PARTY TRANSACTIONS
During 1995, 1994 and 1993, the Company purchased merchandise and
contracted
labor from Triumph and its affiliates amounting to $25,601,000,
$17,900,000, and $25,500,000, respectively. During 1995, Triumph
agreed to extend terms of payment to the Company and began
charging interest on the amounts owed which aged beyond 30 days
payment terms. The rate of interest charged is 9% and the amounts
paid in 1995 were $206,000. As of December 31, 1995 and 1994 the
payable to Triumph was $5,172,771 and $2,532,502, respectively.
The Company's sales to Maidenform from April 26, 1995 to
December 31, 1995 were $2,595,000. The Company also has
remitted to Maidenform $13,894,000 as repayment of the advances
made by Maidenform used to satisfy the Company's bank debt on
April 26, 1995. The Company is charged a rate which
approximates prime plus 1% on its intercompany balance with
Maidenform. As of December 31, 1995, $5,904,383 was payable to
Maidenform.
Until July 1993, Triumph guaranteed certain notes payable and
lines of credit, for which the Company incurred loan guarantee
fees amounting to approximately $80,000 in 1993.
In July 1986, the Company's former President acquired 250,000
shares of the Company's common stock for $1 per share, which
approximated market value, in exchange for a $250,000 promissory
note. The promissory note called for semi-annual interest
payments at an annual interest rate of 7.5%, with principal due on
October 31, 1994. The former President's employment agreement
also included a bonus of $550,000 which was paid upon expiration
of the agreement on October 31, 1994. At such time the
aforementioned note was paid in full.
F-17
NCC INDUSTRIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
___________
10. MAJOR CUSTOMERS
The Company had sales to one customer which approximated 16% in 1995, 17%
in 1994, and 20% in 1993. Sales to another customer approximated 14% in
1995, 18% in 1994, and 16% in 1993 and sales to a third customer
approximated 11% in 1995, and 9% in 1994.
11. CONTINGENCIES
The Company is subject to actions that arise in the ordinary course of
its business activities. Management believes that any resolution of such
matters will not materially affect the financial position or results of
operations of the Company. Management believes that they have
meritorious defenses and intends to vigorously defend such actions.
12. FAIR VALUES OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used by the Company in
estimating its fair value disclosures for financial instruments:
Cash and cash equivalents: The carrying amount reported in the
balance sheet for cash and cash equivalents approximates its fair
value.
Investment securities: The fair value for marketable debt and equity
securities are based on quoted market prices. Fair value approximates
carrying value at December 31, 1995.
Long term debt: The Company believes the fair value of its long-term
debt approximates its carrying value as the debt is at a fixed rate that
approximates the rate at which the company could currently borrow similar
funds in the same jurisdiction.
13. SUBSEQUENT EVENTS
In March 1996, the Company made a decision to close its subsidiary's two
leased
Puerto Rican manufacturing facilities and subsequent to that date began a
process of notification of employees and the government of Puerto Rico.
Although the
government of Puerto Rico has made offers to the Company to retain the
facility, which Registrant's management is considering, management
believes that the facility will be closed and its sewing assembly
operations will be transferred to other locations.
Management believes that all equipment from these facilities will be used
at other locations; however, the leases on these facilities, which have
combined annual rental of approximately $94,000, do not expire until 1999
and 2003. Management has not determined the total expected cost of the
closure which will be recorded in 1996.
F-18
INDEPENDENT AUDITORS' REPORT
The Board of Directors
NCC Industries, Inc.
Cortland, New York
Our report on the consolidated financial statements of NCC Industries,
Inc. and Subsidiary is included on page F-2 of this Form 10-K. In
connection with our audits of such financial statements, we have also
audited the respective years financial statement schedule on page F-20 of
this Form 10-K.
In our opinion, the financial statement schedule for the respective years
referred to above, when considered in relation to the basic financial
statements taken as a whole, present fairly, in all material respects, the
information required to be included therein.
COOPERS & LYBRAND L.L.P.
Syracuse, New York
February 3, 1995
F-19
NCC INDUSTRIES, INC. AND SUBSIDIARY
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
___________
Col. A Col. B Col. C Col. D
Col. E
Additions
Balance at Charged to
Balance at
Beginning Costs and
End
Description of Period Expenses Deductions
of Period
1995
Allowance for doubtful
accounts receivable $350,000 $108,000 $ 26,000
(a) $432,000
1994
Allowance for doubtful
accounts receivable $350,000 ($ 16,447) ($ 16,447)
(b) $350,000
1993
Allowance for doubtful
accounts receivable $312,700 $ 72,400 $ 35,100
(a) $350,000
</TABLE>
(a) Uncollectible accounts written off.
(b) Uncollectible accounts written off net of bad debt recoveries.
F-20
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of
the Securities Exchange Act of 1934, Registrant has duly
caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
By: /s/ Elizabeth Coleman
Elizabeth Coleman Date: 10/25/96
Chairman, President, and
Chief Executive Officer
F-21
