SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
Amendmant No. 1
(MARK ONE) FORM 10-Q/A
X QUARTERLY REPORT PURSUANT TO SECTION 13
OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly period ended June 29, 1996
_________ 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 or organization) Identification No.)
165 MAIN STREET, CORTLAND, NEW YORK 13045
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (607)756-2841
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
At June 29, 1996, there were outstanding 4,375,492
shares of registrant's Common Stock, par value $1.00 per
share.
NCC INDUSTRIES, INC.
FORM 10-Q
INDEX
PART I. FINANCIAL INFORMATION:
Item 1. Financial Statements:
Consolidated Balance Sheets
Consolidated Statements of Income and Retained
Earnings
Consolidated Statements of Cash Flows
Notes to Financial Statements
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations
PART II. OTHER INFORMATION:
Item 1. Legal Proceedings
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
SIGNATURES
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PART I - FINANCIAL INFORMATION Item 1.
Financial Statements.
NCC INDUSTRIES, INC. AND SUBSIDIARY BALANCE
SHEETS
(UNAUDITED)
June 29, December 31,
1996 1995
ASSETS
Current assets
Cash and cash equivalents $ 1,089,808 $ 725,198
Investments 115,967 671,382
Accounts receivable, net 16,132,995 15,864,241
Inventories (Note 2) 48,814,995 45,020,477
Other current assets 2,823,212 2,347,071
Total Current Assets 68,976,977 64,628,369
Property, plant and equipment at cost, net 9,334,822 10,155,629
Bond issuance cost 50,553 59,138
Other assets 428,417 525,606
$78,790,769 $75,368,742
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Notes payable $ - $ -
Accounts payable and accrued expenses 36,479,563 32,510,620
Current portion of long-term debt 445,000 445,000
Total Current Liabilities 36,924,563 32,955,620
Long term debt, less current portion 1,916,415 1,916,415
Other liabilities 2,169,054 1,664,956
Shareholder's equity 37,780,737 38,831,751
$78,790,769 $75,368,742
See notes to financial statements.
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NCC INDUSTRIES, INC. AND SUBSIDIARY
STATEMENTS OF INCOME AND RETAINED
EARNINGS
(UNAUDITED)
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Three Months Ended Six Months Ended
, June 29, July 2, June 2, July 2,
1996 1995 1996 1995
STATEMENTS OF INCOME
Net Sales $28,106,000 $34,085,221 $50,800,362 $61,870,819
Cost and expenses
Cost of sales, shipping, selling,
general and administrative expenses 28,977,278 32,116,222 51,459,339 58,654,359
Interest expense 526,749 469,167 857,014 853,306
29,504,027 32,585,389 52,316,353 59,507,665
Income (loss) before taxes (1,398,027) 1,499,832 ( 1,515,991) 2,363,154
Income taxes (benefit ( 474,352) 429,399 ( 464,977) 648,182
Net Income (loss) ($ 923,675) $1,070,433 ($1,051,014) $ 1,714,972
Income per common share ($.21) $.24 ($.24) $.39
Weighted average shares used in
computing per share amounts 4,375,492 4,375,492 4,375,492 4,375,492
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Three Months Ended Six Months Ended
June 29, July 2, June 29, July 2,
1996 1995 1996 1995
STATEMENTS OF RETAINED EARNINGS
Retained earnings, beginning $31,442,688 $29,366,463 $31,570,027 $28,721,924
Net income (923,675) 1,070,433 (1,051,014) 1,714,972
Retained earnings, ending $30,519,013 $30,436,896 $30,519,013 $30,436,896
See notes to financial statements.
NCC INDUSTRIES, INC. AND SUBSIDIARY
STATEMENTS OF CASH FLOWS
(UNAUDITED)
Six Months Ended
June 29, July 2,
1996 1995
Cash flows from operating activities
Net income (loss) ($1,051,314) $1,714,972
Adjustments to reconcile net income (loss) to net cash
used in operating activities
Depreciation 774,273 735,648
Amortization 8,585 10,187
Provision for losses on accounts receivable 60,000 54,000
Loss from retirement of equipment 131,734 11,848
Transactions with Majority Shareholder- 1,445,812
Net change in operating assets and liabilities:
Increase in accounts receivables (328,754) ( 1,858,170)
Increase in inventory (3,794,518) ( 7,684,550)
Increase in accounts payable and accrued expenses 3,968,943 9,994,539
(Increase) decrease in other assets 97,189 -
Increase (decrease) in other liabilities 504,098 ( 72,461)
Increase in other current assets (476,141) ( 691,774)
Net cash provided by (used in) operating activities (105,605) 3,772,958
Cash flows from investing activities
Purchase of plant & equipment ( 85,200) ( 219,233)
Proceeds from sales of investments 555,415
- -
Net cash provided by (used in) investing activities 470,215 ($ 219,233)
See notes to financial statements
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NCC INDUSTRIES, INC. AND SUBSIDIARY
STATEMENTS OF CASH FLOWS (CONTINUED)
(UNAUDITED)
Six Months Ended Six Months Ended
June 29, July 2,
1996 1995
Cash flows from financing activities
Repayment of Majority Shareholder advances- ($4,116,377)
Net cash used in financing activities ( 4,116,377)
Net increase (decrease) in cash $ 364,610 ( 562,652)
Cash, beginning of year $ 725,198 $ 1,034,820
Cash, end of quarter $ 1,089,808 $ 472,168
Supplemental disclosure of cash flow information.
(See note 4 of Notes to Financial Statements)
Cash paid during the six months for interest $ 164,273 $ 445,561
Cash paid during the six months for income taxes $18,360 $ 68,629
See notes to financial statements.
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NCC INDUSTRIES, INC. AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS
1. Basis of Presentation:
The accompanying unaudited condensed consolidated financial
statements have been prepared in accordance with generally
accepted accounting principles for interim financial
information and with the instructions to Form 10-Q
and Rule 10-01 of Regulation S-X of the Securities and Exchange Commission.
Accordingly, they do not include all of the information
andfootnotes required by generally accepted accounting
principles for complete financial statements. In the
opinion of management, all adjustments (consisting of normal
recurring adjustments) considered necessary for a fair
presentation have been included. Operating results for the six month
period ended June 29, 1996 are not necessarily indicative ofthe
results that may be expected for the year ending December
31, 1996. The balance sheet at December 31, 1995 has
been derived from the audited balance sheet at that date.
For further information, refer to the consolidated financialstatements and footnotes thereto included in the Company's Annual
Report on Form 10-K for the year ended December 31, 1995.
2. Inventory:
a) Inventories at June 29, 1996 are stated at the lower of cost
(first-in, first-out) or market (generally realizable net
amount), and are obtained from the perpetual
inventory records of the Company. No physical inventory was taken.
b) Inventories consist of:
June 29, December 31,
1996 1995 (unaudited)
Raw Materials $ 7,278,591 $7,566,204
Work in process 8,988,946 10,659,170
Finished goods 32,547,458 26,795,103
Total $ 48,814,995 $ 45,020,477
3. Net income per share:
Per share amounts are based on the weighted averagenumber
of shares outstanding during the period.
4. Registrant's management has announced the pending
closure of its Cortland, NY administrative offices by
the fourth quarter of 1996, and Registrant will
utilize certain administrative services from its
majority shareholder Maidenform, Inc. in Bayonne, NJ.
Registrant's management estimates that non-employee
benefit related costs will include the write-down of
impaired assets and will aggregate between $500,000
and $800,000 to be recorded in the third quarter of
1996. The employee-related costs have not been
estimated at the time of filing but are expected to
be material. Management intends to seek to dispose
of the building facility for fair market value and
relocate certain employees to Registrant's other
facility in Cortland, New York and Maidenform's
facility in Bayonne, New Jersey.
NCC INDUSTRIES, INC. AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS
It is expected that the remaining employees will be
laid off with severance pay. The following exit
costs have been recorded in connection with the
pending Cortland, New York facility closure:
severance payments of approximately $115,000; and
employee related benefits of approximately $389,000.
All such costs were recorded as general expense on
Registrant's income statements. At June 29, 1996, no
amounts had been paid and charged against the
liability and there were no adjustments to the
liability. It is anticipated that the closure of the
facility will be substantially completed by the end
of 1996 or the first quarter of 1997.
In March, 1996 Registrant announced its intent to
close its Puerto Rican manufacturing facility by the
third quarter of 1996 and has recorded a charge of
$1,348,000 for its closure. Management expects to
move the manufacturing activities to Maidenform's
facilities located in Puerto Rico and the Caribbean
and to lay off the employees in Registrant's facility
with severance pay. Registrant intends to negotiate
with the owner of the facility to terminate the lease
prior to expiration and to sell the machinery and
equipment to a bona fide purchaser. The following
approximate exit costs have been recorded in
connection with the pending Puerto Rico facility
closure: lease commitment of $478,000; estimates for
security and maintenance: $95,000 and $21,000,
respectively; severance payments of $588,000; and
employee related benefits of $85,000. All such costs
were recorded as general expense on Registrant's
income statement.
At June 29, 1996, no amounts had been paid and
charged against the liability and there were no
adjustments to the liability. Registrant anticipates
that the closure of the Puerto Rico facility be will
be substantially complete at the end of the third
quarter 1996.
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ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
Results of Operations
Net sales for the second quarter of 1996 were 17.5%
lower than the second quarter of 1995 due to continued
softness in the brands and private label business of
Registrant's major customers. While the cancellation of the
"Bill Blass" trademark merchandise continues to affect
comparative results, Walmart, which previously purchased the
"Bill Blass" garments, has partially replaced this lost
business with new "Kathy Lee" trademarked styles resulting
in a net decrease of 20% for the second quarter of 1996 as
compared to the second quarter of 1995 for Walmart.
Registrant's management anticipates continued partial
recovery of the sales to Walmart in the second half of 1996.
Sales to Mervyn's, another major customer, have declined 30%
for the first six months of 1996 as compared to the first
six months of 1995 due to reduced orders caused by continued
softness in the retail markets. Registrant's management
continues to anticipate additional partial recovery of this
business in the second half of 1996. Sales to Mast
Industries declined 6% in the first six months of 1996 as
compared to the first six months of 1995. However,
continued improvement in shipments to Mast are anticipated
by Registrant's management in the second half of 1996.
Registrant's management also anticipates at least partial
recoveries in its branded product lines which will reduce
inventory levels further. Partially offsetting a 21%
decline in unit volume is an increase in the average revenue
per unit of 4.3% in the first six months of 1996 as compared
to the first six months of 1995.
Cost of sales, shipping and advertising costs as a
percentage were generally consistent for the first six
months of 1996 as compared with the first six months of
1995. Selling expense increased as a percentage of sales
primarily due to the reduced sales volume. General and
administrative expenses were higher in the second quarter of
1996 as compared to the second quarter of 1995 due to the
recording of employee benefit costs related to the closure
of Registrant's Puerto Rico and Cortland, NY manufacturing
facilities. Registrant's management recently announced the
pending closure of its Cortland, NY administrative offices
nd Registrant will utilize certain administrative services
from its majority shareholder, Maidenform, Inc., in Bayonne,
N.J. Such closure is expected to occur by the fourth quarter
of 1996 and is expected to aid the cash flow position of
Registrant and its majority shareholder in 1997. Registrant
anticipates the recording of non-employee benefit costs
(including impaired assets write downs) in the range of
$500,000 to $800,000 in the third quarter of 1996. The
employee related benefit costs have not been estimated at
the time of filing but are expected to be material. Because
of these closure costs, Registrant may not report a profit
for the year 1996. As a result of the aforementioned items
net loss was $923,675 for the second quarter of 1996 and a
loss of $1,051,014 in the first six months of 1996 from a
profit of $1,070,433 in the second quarter of 1995 and a
profit of $1,714,972 in the first six months of 1995.
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Financial Condition
Net cash flows from operations decreased during the
first six months of 1996 as compared with the first six
months of 1995 due primarily to the net loss for the period.
Inventories at June 29, 1996 were approximately $3,795,000
higher than at December 31, 1995 due in part to the lower
than anticipated shipments in the first six months of 1996
but were $2,153,000 lower than at March 30, 1996 due to
reduced production levels achieved in response by management
to continued softness in the market place for Registrant's
products. Net cash flows from investing activities were
used to finance operating activities and increase cash on
hand. In order to finance its capital and other corporate
expenditures, Registrant expects to continue to use cash
from operations and amounts available to Registrant under
the revolving credit facility described hereafter.
Working capital was $32,052,000 at June 29, 1996 as
compared to $31,673,000 at December 31, 1995. While
Registrant and its parent have credit facilities of
$220,000,000, the lines of credit were virtually all
utilized at the time of filing. At June 29, 1996, the
Maidenform Group was in default of certain financial and
other covenants under such credit facilities.
Notwithstanding such defaults, such lenders have continued
to provide funding to the Maidenform Group under such credit
facilities. The Maidenform Group subsequently has reached
an agreement with its lenders which will provide financing
through the end of the year and includes a waiver of all
defaults and less restrictive covenants. However, in the
event of a default by Registrant or any other member of the
Maidenform Group, these lenders can demand repayment of all
amounts outstanding and assert their rights as secured
creditors, which security interest includes substantially
all of the assets of Registrant and the other members of the
Maidenform Group. During 1996, payments by the Maidenform
Group to its vendors and suppliers have been extended, as a
result of discussions with its vendors. Registrant's
management believes that the Maidenform Group's line of
credit and debt capacity under the revolving credit
facility, together with vendor support and cash flow from
operations, are adequate to meet its anticipated operating
needs through the end of 1996. However, in the event of any
material adverse change in either vendor support or in
Registrant's anticipated sales for 1996, Registrant's
liquidity would be adversely affected.
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Item 6. Exhibits and Reports on Form 8-K
Exhibits No. Description
(a)
27 Financial Data Schedule
(b) Reports on Form 8-K
No Reports on Form 8-K have been filed during the quarter
ended June 29, 1996.
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EXHIBIT INDEX
Title of Document
Page
Financial Data Schedule
15
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NCC INDUSTRIES, INC.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Herzog, Heine, Geduld, Inc. ("HHG"), the owner of
approximately 30,214 shares of Registrant's common stock,
has commenced a class action against Registrant, Maidenform,
Inc. ("Maidenform"), Maidenform Worldwide, Inc.
("Worldwide"), Triumph International Overseas, Ltd. (The
former majority shareholder of Registrant) ("Triumph"),
Guenther Spiesshofer (a former officer and shareholder of
Registrant) ("Spiesshofer"), and Frank Magrone (a former
officer and shareholder of Registrant) ("Magrone"). The
action was commenced in New York State Court, seeks
compensatory damages in an unspecified amount and alleges
that Triumph Spiesshofer, and Magrone breached their
fiduciary duty to HHG by selling their stock of Registrant
to Worldwide and failing to include HHG and the remaining
shareholders in the sale. The complaint also alleges that
Maidenform and Worldwide aided and abetted the selling
defendants' breach by structuring the stock purchase to
exclude the public shareholders. HHG also claims that
Maidenform and Worldwide, as the controlling shareholders of
Registrant since the sale, breached their fiduciary duty to
the public shareholders by operating Registrant as a
subsidiary in the absence of purchasing 100% of the stock.
Registrant and its affiliates believes that the claims lack
merit and intends to defend the suit vigorously.
Item 5. Other Information
On July 17, 1996, Frank Magrone resigned as a director,
officer and employee of Registrant to pursue other business
opportunities, Mr. Magrone has also assumed a consulting
position with Maidenform, Worldwide and its affiliated
companies.
Registrant's management has recently announced the
closure of its Main Street administrative facility in
Cortland, New York, which closing will occur in the fourth
quarter of 1996. Registrant will utilize certain
administrative services from its majority shareholder
Maidenform, Inc. Registrant's management has not determined
the total expected cost of closure which will be recorded in
the third quarter of 1996. Registrant's management believes
that such closure will result in lower administrative costs
and savings for Registrant.
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SIGNATURES
Pursuant to the requirements to 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.
NCC
INDUSTRIES, INC.
By: /s/ Elizabeth Coleman 10-25-96
Elizabeth Coleman Date
Chairman, President, and
Chief Executive Officer
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