SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
(MARK ONE) FORM 10-Q
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
-2-
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.
-3-
NCC INDUSTRIES, INC. AND SUBSIDIARY
STATEMENTS OF INCOME AND RETAINED EARNINGS
(UNAUDITED)
<TABLE>
<S> <C> <C> <C> <C>
Three Months Ended Six Months Ended,
June 29, July 2, June 29, 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
-4-
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.
-5-
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
-6-
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
</TABLE>
See notes to financial statements.
-7-
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 and
footnotes 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 of the
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 financial statements
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 average number
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. 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.
-8-
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 and Registrant will utilize certain
administrative services from its majority shareholder,
Maidenform, Inc., in Bayonne, NJ. 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.
-9-
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. The Maidenform Group has reached an
agreement in principle with its lenders, which is subject to
final documentation and the resolution of certain
intercreditor issues, which, when finalized, will result in
waivers of all such defaults. If the waivers are not obtained,
these lenders can demand repayment of all amounts outstanding and assert
their rights as secured creditors. Notwithstanding such
defaults, the Maidenform Group's lenders have continued to
provide funding to the Maidenform Group under such credit
facilities. 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.
-10-
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.
-12-
EXHIBIT INDEX
Title of Document
Page
Financial Data Schedule
15
-13-
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 believe that the claims lack merit and intend 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.
-11-
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.
Date 8/19/96_________ By: /s/ Ira Glazer
Ira Glazer
Executive Vice President -
Chief Operating Officer
Date 8/19/96__ _____ By: /s/ Steven N. Masket
Steven N. Masket
Executive Vice President -
General Counsel
Secretary
-15-
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<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-29-1996
<CASH> 1,089,808
<SECURITIES> 115,967
<RECEIVABLES> 16,132,995
<ALLOWANCES> 0
<INVENTORY> 48,814,995
<CURRENT-ASSETS> 68,976,977
<PP&E> 9,334,822
<DEPRECIATION> 0
<TOTAL-ASSETS> 78,790,769
<CURRENT-LIABILITIES> 36,924,563
<BONDS> 0
0
0
<COMMON> 4,866,841
<OTHER-SE> 32,913,896
<TOTAL-LIABILITY-AND-EQUITY> 78,790,769
<SALES> 50,800,362
<TOTAL-REVENUES> 50,800,362
<CGS> 51,459,339
<TOTAL-COSTS> 51,459,339
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 857,014
<INCOME-PRETAX> (1,515,991)
<INCOME-TAX> ( 464,977)
<INCOME-CONTINUING> (1,051,014)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,051,014)
<EPS-PRIMARY> (.24)
<EPS-DILUTED> (.24)
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