<PAGE>
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended February 29, 1996
-------------------
Commission file number 0-14674
ANDOVER TOGS, INC.
----------------------------------------------------
(Exact name of Registrant as specified in its charter)
DELAWARE 13-5677957
- ------------------------------- ----------------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification Number)
1333 Broadway, New York, New York 10018
- --------------------------------------- --------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number,including area code: (212) 244-0700
---------------
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding twelve months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. YES NO X
----- -----
Indicate by check mark whether the Registrant has filed all documents and
reports required to be filed by Section 12, 13, or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a
plan confirmed by a court. Yes No X
----- -----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date. 4,470,815 shares of common
stock, $.10 par value, of the Registrant were outstanding as of December 22,
1997.
<PAGE>
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. - Financial Statements
ANDOVER TOGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
- --------------------------------------------------------------------------------
February 29, November 30,
1996 1995
----------- -----------
ASSETS
CURRENT ASSETS:
Cash $ 1,111,000 $ 862,000
Accounts receivable - net 10,787,000 9,696,000
Inventories (Note 2) 13,441,000 13,291,000
Refundable income taxes 877,000 920,000
Other current assets 428,000 258,000
----------- -----------
Total current assets 26,644,000 25,027,000
PROPERTY, PLANT AND EQUIPMENT - Net 8,030,000 8,229,000
RESTRICTED CASH 360,000 360,000
OTHER ASSETS 399,000 365,000
----------- -----------
TOTAL $35,433,000 $33,981,000
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes payable - bank $12,400,000 $ 6,200,000
Accounts payable -- 4,612,000
Accrued expenses and other current
liabilities 1,346,000 2,034,000
Current portion of long-term debt
and obligations under capital leases 1,791,000 2,019,000
----------- -----------
Total current liabilities 15,537,000 14,865,000
LONG TERM DEBT AND LIABILITIES SUBJECT TO
COMPROMISE (Note 4) 6,794,000 4,002,000
OTHER LIABILITIES 163,000 142,000
----------- -----------
Total liabilities 22,494,000 19,009,000
----------- -----------
STOCKHOLDERS' EQUITY
Common stock 466,000 466,000
Additional paid-in capital 11,154,000 11,154,000
Retained earnings 1,959,000 3,992,000
Less treasury stock, at cost (640,000) (640,000)
------------ ------------
Total stockholders' equity 12,939,000 14,972,000
----------- -----------
TOTAL $35,433,000 $33,981,000
=========== ===========
See notes to consolidated financial statements.
-1-
<PAGE>
<PAGE>
ANDOVER TOGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED FEBRUARY 29, 1996 AND FEBRUARY 28, 1995
(UNAUDITED)
- --------------------------------------------------------------------------------
1996 1995
---- ----
NET SALES $12,810,000 $15,016,000
COST OF GOODS SOLD (Note 2) 11,424,000 12,278,000
----------- -----------
GROSS PROFIT 1,386,000 2,738,000
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 3,028,000 3,029,000
----------- -----------
OPERATING LOSS (1,642,000) (291,000)
INTEREST EXPENSE 391,000 249,000
----------- -----------
LOSS BEFORE INCOME TAX BENEFIT (2,033,000) (540,000)
INCOME TAX BENEFIT -- (173,000)
------------ -----------
NET LOSS $ (2,033,000) $ (367,000)
============ ===========
LOSS PER SHARE $(.45) $(.08)
===== =====
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING 4,471,000 4,361,000
========= =========
See notes to consolidated financial statements.
-2-
<PAGE>
<PAGE>
ANDOVER TOGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
THREE MONTHS ENDED FEBRUARY 29, 1996 AND FEBRUARY 28, 1995
(Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Common Stock Additional Treasury Stock
------------------- Paid-in Retained -------------------
Shares Amount Capital Earnings Shares Amount Total
------ ------ ------- -------- ------ ------ -----
<S> <C> <C> <C> <C> <C> <C> <C>
THREE MONTHS ENDED
FEBRUARY 29, 1996
BALANCE
DECEMBER 1, 1995 4,655,490 $466,000 $11,154,000 $3,992,000 184,675 $(640,000) $14,972,000
Net loss (2,033,000) (2,033,000)
--------- -------- ----------- ----------- ------- --------- -----------
BALANCE
FEBRUARY 29, 1996 4,655,490 $466,000 $11,154,000 $1,959,000 184,675 $(640,000) $12,939,000
========= ======== =========== ========== ======= ========= ===========
THREE MONTHS ENDED
FEBRUARY 28, 1995
BALANCE
DECEMBER 1, 1994 4,542,990 $454,000 $10,870,000 $8,271,000 184,675 $(640,000) $18,955,000
Issuance of stock (Note 3) 100,000 10,000 265,000 275,000
Net loss (367,000) (367,000)
--------- -------- ----------- ---------- ------- --------- -----------
BALANCE
FEBRUARY 28 1995 4,642,990 $464,000 $11,135,000 $7,904,000 184,675 $(640,000) $18,863,000
========= ======== =========== ========== ======= ========= ===========
</TABLE>
See notes to consolidated financial statements.
-3-
<PAGE>
<PAGE>
ANDOVER TOGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED FEBRUARY 29, 1996 AND FEBRUARY 28, 1995
(Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1996 1995
----------- ----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(2,033,000) $ (367,000)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization 316,000 330,000
Deferred income taxes -- (59,000)
Changes in assets and liabilities, net of acquisition:
Accounts receivable (1,091,000) 703,000
Inventories (150,000) (627,000)
Other assets (161,000) (566,000)
Accounts payable (4,612,000) (134,000)
Accrued expenses and other liabilities (667,000) 168,000
Liabilities subject
to compromise 2,792,000 --
----------- -----------
Net cash used in operating
activities (5,606,000) (552,000)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition -- (3,800,000)
Capital expenditures-net (117,000) (103,000)
----------- -----------
Net cash used in investing
activities (117,000) (3,903,000)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in notes payable - bank 6,200,000 4,800,000
Repayments of debt (228,000) (303,000)
----------- -----------
Net cash provided by financing
activities 5,972,000 4,497,000
----------- ----------
NET INCREASE IN CASH 249,000 42,000
CASH, BEGINNING OF PERIOD 862,000 584,000
----------- ----------
CASH, END OF PERIOD $ 1,111,000 $ 626,000
=========== ==========
SUPPLEMENTAL INFORMATION:
Cash paid during the period for:
Interest $ 307,000 $ 119,000
=========== ==========
Income taxes $ 3,000 $ 131,000
=========== ==========
SCHEDULE OF NON CASH INVESTING ACTIVITIES:
Acquisition:
Fair value of assets acquired $4,075,000
Common stock issued $ 275,000
----------
Total cash paid for the net assets acquired $3,800,000
==========
</TABLE>
See notes to consolidated financial statements.
-4-
<PAGE>
<PAGE>
ANDOVER TOGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
- --------------------------------------------------------------------------------
1. BASIS OF PRESENTATION
The consolidated financial statements as of February 29, 1996 and for the
three month period then ended have been prepared by the Company without
audit. In the opinion of management, all adjustments consisting of only
normal recurring adjustments necessary for a fair presentation of the
financial position of the Company, the results of its operations and cash
flows have been made.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted. It is suggested that these
financial statements be read in conjunction with the financial statements
and notes thereto included in the Company's Annual Reports on Form 10-K for
the years ended November 30, 1995 and 1996.
The results of operations for the period ended February 29, 1996 are not
necessarily indicative of the operating results for the full year.
Per share information is computed by dividing the net loss amounts by the
weighted average number of shares of common stock outstanding during each
period.
2. INVENTORIES
Inventories consist of:
February 29, November 30,
1996 1995
----------- -----------
Raw materials $ 1,681,000 $ 2,995,000
Work in process 3,152,000 3,253,000
Finished goods 8,608,000 7,043,000
----------- -----------
$13,441,000 $13,291,000
=========== ===========
Inventories and cost of goods sold at February 29, 1996 are determined
based upon the estimated gross profit method.
3. ACQUISITION
On February 27, 1995, the Company acquired the inventory, trade names and
customer orders of Dobie Industries, Inc. ("Dobie"), a manufacturer of
children's and women's apparel. The purchase price was approximately
$3,900,000 in cash, including acquisition fees, 112,500 shares of the
Company's common stock and a warrant to purchase 50,000 additional shares
of stock at $2.50 per share. The acquisition was accounted for as a
purchase and gave rise to cost in excess of net assets acquired. In
November 1995, based on an evaluation of Dobie's projected future
operations, management wrote off the cost in excess of net assets acquired.
4. SUBSEQUENT EVENTS
During the year ended November 30, 1995, the Company incurred losses of
$4,279,000 and was unable to comply with certain covenants of its existing
debt agreements. Negotiations with the Company's lenders to obtain waivers
in connection with such defaults were unsuccessful. Negotiations with such
lenders and other prospective lenders to obtain
-5-
<PAGE>
<PAGE>
more permanent financings were also unsuccessful. As a result of the
ensuing severe liquidity crisis, on March 19, 1996, the Company filed for
protection under Chapter 11 of the United States Bankruptcy Code. As a
result of the filing, the Company recorded all liabilities prior to the
filing date as subject to compromise.
On March 20, 1996, the Company obtained debtor-in-possession financing with
its existing lenders for $11 million, which was due to terminate in
December 1996. On September 19, 1996, the Company obtained
debtor-in-possession financing from the CIT Group/Commercial Services, Inc.
for a two year $15 million revolving credit facility to replace the $11
million facility.
On May 12, 1997, the Company emerged from Chapter 11 of the Bankruptcy Code
and entered into a two year financing agreement with CIT/Group Commercial
Services, Inc. (The "CIT Facility"). The CIT Facility provides for a
$10,500,000 revolving credit line of which $3,000,000 is available for
letters of credit.
Item 2. - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Three Months Ended February 29, 1996 vs 1995
Net sales for the three months ended February 29, 1996 (the "`96 Quarter") were
$12,810,000, a decrease of $2,206,000 or 14.7% as compared with net sales of
$15,016,000, in the comparable period in 1995 (the "`95 Quarter"). The decrease
occurred because, in the '96 Quarter, the Company lost sales programs that it
had in fiscal 1995.
Gross profit as a percentage of net sales decreased to 10.8% from 18.2% in the
`95 Quarter. The decrease occurred because the Company accepted business at
lower margins in order to carry its manufacturing facilities and in an attempt
to maintain market share. In addition, the Company closed an inefficient
manufacturing facility. Pricing pressures were intense, and the Company was
unable to pass through cost increases to its customers.
Selling, general and administrative expenses for the `96 Quarter were $3,028,000
or 23.6% of sales as compared to $3,029,000 or 20.2% of sales for the `95
Quarter. The expenses remained constant for both quarters, but increased as a
percentage of net sales as a result of lower sales volume.
Interest expense increased $142,000 for the `96 Quarter compared to the `95
Quarter due to higher short-term borrowing levels necessary to cover losses.
LIQUIDITY AND CAPITAL RESOURCES
The Company's working capital at February 29, 1996 increased $945,000 to
$11,107,000 as compared to $10,162,000 at November 30, 1995, due primarily to
the reclassification of current liabilities to long term debt and liabilities
subject to compromise, net of the loss for the '96 Quarter.
On March 19, 1996 the Company, after negotiations with its lenders, filed a
petition for reorganization under Chapter 11 of the United States Bankruptcy
Code.
On May 12, 1997, the Company emerged from Chapter 11 of the Bankruptcy Code and
entered into a two year financing agreement with CIT/Group Commercial Services,
Inc. (The "CIT Facility"). The CIT Facility provides for a
-6-
<PAGE>
<PAGE>
$10,500,000 revolving credit line of which $3,000,000 is available for letters
of credit. Advances under the revolver bear interest at prime plus .85%. The
advances are based on 85% of eligible accounts receivable plus 50% of eligible
inventory and are collateralized by all of the Company's assets other than its
real estate. Under the CIT Facility, the Company is prohibited, among other
restrictions, from pledging assets, creating additional indebtedness or paying
dividends. In addition, the Company is required to comply with certain financial
covenants, including minimum levels of EBITDA, working capital, tangible net
worth and limits on capital expenditures. The Company has not borrowed on the
CIT Facility.
CURRENT UNCERTAINTIES
The Company anticipates a substantial decrease in volume for fiscal 1997 as
compared with fiscal 1996. While the Company's overhead has been reduced in
anticipation of lower sales volume, the Company continues to incur restructuring
costs in 1997 relating to the bankruptcy and losses from operations. The
Company, therefore, anticipates that it will report a loss for fiscal 1997. One
customer currently accounts for approximately 83% of the Company's orders.
Accordingly, the resumption of stable and profitable operations will require the
Company to both increase its total sales and expand its customer base.
FORWARD-LOOKING STATEMENTS
Statements in this Report include forward-looking statements that involve a
number of risks and uncertainties. These risks include, among others, the
Company's sharp reduction in sales, narrow customer base and the other risks
detailed from time to time in the Company's SEC reports. The Company's actual
results could differ materially from those anticipated in the forward-looking
statements.
Item 3. - Quantitative and Qualitative Disclosures about Market Risk
Not applicable.
PART II - OTHER INFORMATION
Item 6. - Exhibits and reports on Form 8-K
(a) Exhibits
Exhibit No. Description
---------- -----------
27 Financial Data Schedule
(b) Reports on Form 8-K.
None.
-7-
<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
ANDOVER TOGS, INC.
Date December 22, 1997 By /s/ William L. Cohen
-------------------------- -----------------------------
William L. Cohen
Chairman of the Board and
Chief Executive Officer
Date December 22, 1997 By /s/ Alan Kanis
-------------------------- -----------------------------
Alan Kanis
Treasurer and Chief Financial
and Accounting Officer
<PAGE>
<PAGE>
EXHIBIT INDEX
Exhibit No. Description
- ---------- -----------
27 Financial Data Schedule.
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> NOV-30-1996
<PERIOD-START> DEC-01-1995
<PERIOD-END> FEB-29-1996
<CASH> 1,111,000
<SECURITIES> 0
<RECEIVABLES> 11,097,000
<ALLOWANCES> 310,000
<INVENTORY> 13,441,000
<CURRENT-ASSETS> 26,644,000
<PP&E> 20,605,000
<DEPRECIATION> 12,575,000
<TOTAL-ASSETS> 35,433,000
<CURRENT-LIABILITIES> 15,537,000
<BONDS> 0
<COMMON> 466,000
0
0
<OTHER-SE> 11,154,000
<TOTAL-LIABILITY-AND-EQUITY> 35,433,000
<SALES> 12,810,000
<TOTAL-REVENUES> 12,810,000
<CGS> 11,424,000
<TOTAL-COSTS> 11,424,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 391,000
<INCOME-PRETAX> (2,033,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,033,000)
<EPS-PRIMARY> (.45)
<EPS-DILUTED> (.45)
</TABLE>
