UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, S.C. 20549
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
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: 1-9734
ONEITA INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 57-0351045
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4130 FABER PLACE DRIVE, SUITE 200, CHARLESTON, SC 29405
(Address of principal executive offices) (Zip Code)
(803) 529 - 5225
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months, and (2) has been subject to such filing for
the past 90 days.
X Yes No
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date. 6,878,506 shares of Common
Stock as of July 31, 1996.
<PAGE>
FORM 10-Q
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION (Unaudited)
Condensed Consolidated Balance Sheets at
June 29, 1996 & September 30, 1995 ..................... 1
Condensed Consolidated Statements of Operations for the
Three Months Ended June 29, 1996 and
July 1, 1995 ........................................... 3
Condensed Consolidated Statements of Operations for the
Nine Months Ended June 29, 1996 and
July 1, 1995 ........................................... 4
Condensed Consolidated Statements of Cash Flows for
the Nine Months Ended June 29, 1996
and July 1, 1995 ....................................... 5
Notes to Condensed Consolidated Financial Statements ... 6
Management's Discussion and Analysis of Financial
Condition and Results of Operations .................... 8
PART II - OTHER INFORMATION
Item 1: Legal Proceedings ............................ 12
Item 2: Changes in Securities ........................ 12
Item 3: Defaults upon Senior Securities .............. 12
Item 4: Submission of Matters to a Vote of Security
Holders ...................................... 12
Item 5: Other Information ............................ 12
Item 6: Exhibits and Reports on Form 8-K ............. 12
Signature .............................................. 13
<PAGE>
ONEITA INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
<TABLE>
<CAPTION>
June 29, September 30,
1996 1995
----------- -------------
(Unaudited) (Note 1)
ASSETS
CURRENT ASSETS:
<S> <C> <C>
Cash $ 4,896 $ 2,749
Refundable income tax --- 2,485
Accounts receivable, less
allowance for doubtful accounts 37,921 29,438
Inventories (Note 2) 56,665 79,968
Prepaid expenses and other
current assets 2,784 4,765
--------- ---------
Total current assets 102,266 119,405
PROPERTY, PLANT AND EQUIPMENT,
at cost, less accumulated
depreciation and amortization 46,041 43,760
OTHER ASSETS 2,572 1,852
--------- ---------
$150,879 $165,017
--------- ---------
<FN>
See notes to condensed consolidated financial statements
</FN>
</TABLE>
<PAGE>
ONEITA INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
<TABLE>
<CAPTION>
June 29, September 30,
1996 1995
----------- -------------
(Unaudited) (Note 1)
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
<S> <C> <C>
Notes payable $ --- $ 23,000
Current portion of long term debt
and capital leases 5,214 4,729
Long-term debt in technical default
classified as current (Note 3) 76,615 ---
Accounts payable 12,281 11,699
Accrued liabilities 9,302 7,073
--------- ---------
Total current liabilities 103,412 46,501
LONG-TERM DEBT AND CAPITAL
LEASE OBLIGATIONS 3,592 37,404
DEFERRED INCOME TAXES --- 3,272
SHAREHOLDERS' EQUITY:
Preferred Stock, Series I, par
value $1.00 per share, 2,000,000
shares authorized, none issued --- ---
Common Stock, $.25 par value,
15,000,000 shares authorized,
6,998,906 shares issued and
outstanding at June 29, 1996
and September 30, 1995 1,750 1,750
Other shareholders' equity 42,125 76,090
--------- ---------
$150,879 $165,017
--------- ---------
<FN>
See notes to condensed consolidated financial statements.
</FN>
</TABLE>
<PAGE>
ONEITA INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended
-------------------------
June 29, July 1,
1996 1995
-------- --------
<S> <C> <C>
Net sales $ 55,212 $ 45,548
Cost of sales 53,768 36,657
--------- ---------
Gross profit 1,444 8,891
Selling, general and administrative
expenses 4,820 4,629
--------- ---------
Income(loss) from operations (3,376) 4,262
Interest expense, net of interest
income of $59 in 1996 and $47
in 1995 1,867 1,044
--------- ---------
Income (loss) before provision for
income taxes (5,243) 3,218
Provision for income taxes --- 1,102
--------- ---------
Net income (loss) $(5,243) $ 2,116
--------- ---------
Net income (loss) per share $ (.76) $ .30
--------- ---------
(Note 6)
<FN>
See notes to condensed consolidated financial statements.
</FN>
</TABLE>
<PAGE>
ONEITA INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per share data)
<TABLE>
<CAPTION>
Nine Months Ended
------------------------
June 29, July 1,
1996 1995
-------- -------
<S> <C> <C>
Net sales $133,635 $137,606
Cost of sales 145,119 110,864
--------- ---------
Gross profit (11,484) 26,742
Selling, general and administrative
expenses 15,331 15,351
Restructuring charges (Note 5) 5,301 ---
--------- ---------
Income(loss) from operations (32,116) 11,391
Interest expense, net of interest
income of $325 in 1996 and $232
in 1995 4,788 2,402
--------- ---------
Income (loss) before provision for
income taxes (36,904) 8,989
(Benefit) provision for income taxes (2,939) 3,386
(Note 4) --------- ---------
Net income (loss) $(33,965) $ 5,603
--------- ---------
Net income (loss) per share $ (4.94) $ .80
(Note 6) --------- ---------
<FN>
See notes to condensed consolidated financial statements.
</FN>
</TABLE>
<PAGE>
ONEITA INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
Nine Months Ended
----------------------
June 29, July 1,
1996 1995
-------- -------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net income (loss) $(33,965) $ 5,603
Adjustments to reconcile net income (loss)
to net cash used in operating activities:
Depreciation and amortization 4,486 3,949
Provision for losses on accounts receivable 400 450
Decrease in deferred income taxes (1,621) (441)
Change in assets and liabilities 20,255 (33,967)
--------- ---------
Net cash used in operating activities (10,445) (24,406)
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property, plant and equipment (7,443) (9,959)
Decrease in equipment lease deposits 883 408
Proceeds from sale of property, plant
and equipment 591 57
--------- ---------
Net cash used in investing activities (5,969) (9,494)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Short-term borrowings 2,000 30,000
Payment of short-term borrowings (25,000) (1,000)
Proceeds from issuance of long-term debt
(including $72,000 classified as current) 72,219 11,000
Purchase of treasury shares --- (1,339)
Sale of Common Stock --- 331
Increase in funds restricted
for capital projects --- (176)
Payment of long-term debt and capital
lease obligations (28,931) (4,810)
Other (1,727) ---
--------- ---------
Net cash provided by
financing activities 18,561 34,006
--------- ---------
NET INCREASE IN CASH
AND CASH EQUIVALENTS 2,147 106
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 2,749 967
--------- ---------
CASH AND CASH EQUIVALENTS AT $ 4,896 $ 1,073
END OF PERIOD --------- ---------
<FN>
See notes to condensed consolidated financial statements.
</FN>
</TABLE>
<PAGE>
ONEITA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(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 Article
10 of Regulation S-X. Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements. The balance sheet at September 30, 1995 has been derived
from the audited financial statements at that date. In the opinion of
management, all adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included. Operating results for the
three-month and nine-month periods ended June 29, 1996 are not necessarily
indicative of the results that may be expected for the year ended September 28,
1996. For further information, refer to the consolidated financial statements
and footnotes thereto included in the Company's annual report to shareholders
for the year ended September 30, 1995.
(2) Inventories -
The Company implemented a plan to reduce inventories levels and recorded
appropriate write-downs in the second fiscal quarter to reflect this decision.
Inventories, stated at the lower of cost (primarily last-in, first-out) or
market, are comprised of the following:
<TABLE>
<CAPTION>
June 29, September 30,
1996 1995
-------- -------------
<S> <C> <C>
Finished goods ................. $37,547 $58,537
Work in process.................. 15,907 17,495
Raw materials and supplies ...... 3,211 3,936
--------- --------
$56,665 $79,968
</TABLE>
--------- --------
<PAGE>
(3) Long-term debt in technical default classified as current -
At June 29, 1996, the Company was not in compliance with certain financial
covenants arising under its January 1996 revolving credit agreement and under a
loan agreement with an institutional lender. Accordingly these obligations,
$57,000 and $4,615, respectively, are subject to acceleration by the lenders and
have been classified as current. Also classified as current pursuant to cross
default provisions are subordinated notes in the amount of $15,000. See
liquidity and capital resources discussion below.
(4) Income Taxes -
An income tax benefit has been provided for the nine month period ended
June 29, 1996 to the extent of income taxes previously paid and refundable and
to the extent of deferred income taxes previously provided.
(5) Restructuring charges -
The operating results for the nine month period ended June 29, 1996
reflects a pretax charge of $5,301 for the write down of facilities to the fair
market value and the estimated personnel transitional costs related to staff
reductions recently implemented.
(6) Net Income Per Share -
Earnings per share are calculated using the weighted average number of
shares of common stock, and where dilutive, common stock equivalents outstanding
during each period. Shares used in computing per share results were 6,878,506
and 6,953,171 for the three months ended June 29, 1996 and July 1, 1995,
respectively and 6,878,506 and 7,002,833 for the nine months ended June 29, 1996
and July 1, 1995, respectively.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Results of Operations
The Company incurred a loss in its third fiscal quarter ending June 29,
1996 of $5.3 million compared to net income of $2.1 million in the third quarter
of last year. The operating loss for the third quarter was primarily caused by
previously announced price decreases.
Net sales for the three months ended June 29, 1996 were $55.2 million as
compared to $45.5 million in the comparable period of the prior year, an
increase of $9.7 million or 21.3%. Net sales of activewear were $47.4 million
for the three months ended June 29, 1996 as compared to $37.6 million in the
comparable period of the prior year, an increase of $9.8 million or 26.1%. The
increase was due to higher unit sales of $19.2 million offset by reduced selling
prices of $9.5 million. Net sales to retail customers were $7.8 million for the
three months ended June 29, 1996 compared to $7.9 million last year.
Gross profit for the quarter ended June 29, 1996 of $1.4 million decreased
$7.4 million from the comparable period of the prior year due to the reduced
pricing mentioned above.
Selling, general and administrative expenses for the three months ended
June 29, 1996 increased $0.2 million from the comparable period of the prior
year due to higher sales related costs.
Interest expense, net of interest income, for the third quarter of 1996 was
$1.9 million compared to $1.0 million for the corresponding period last year.
The increase was due to higher average borrowings as well as higher interest
rates.
Net sales for the nine months ended June 29, 1996 were $133.6 million as
compared to $137.6 million in the comparable period of the prior year, a
decrease of $4.0 million or 2.9%.
Net sales of activewear were $109.8 million for the nine months ended June
29, 1996 as compared to $113.9 million in the comparable period of the prior
year, a decrease of $4.1 million or 3.6%. The decrease was principally due to
$17.3 million of reduced revenues attributable to decreased prices and
promotional pricing offset by an increase of unit sales of $13.9 million. Net
sales to retail customers were $23.8 million for the nine months ended June 29,
1996 compared to $23.7 million last year.
<PAGE>
Gross profit for the nine months ended June 29, 1996 of $(11.5) million
decreased $38.2 million from the comparable period of the prior year due to
second quarter charges and expenses of approximately $14.8 million including
charges to write down certain inventories to their net realizable value as well
as reduced revenues attributable to decreased prices and promotional pricing.
Gross profit, as a percentage of net sales, decreased to (8.6%) compared to
19.4% in the comparable period of the prior year due to the reasons set forth
above.
Included in the nine month loss were restructuring costs $(5.3) million
related to the shutdown of two facilities located in South Carolina and
reductions in administrative and supervisory staff. In May 1996 the Company
reduced its administrative and supervisory staff by approximately 130 persons
which is expected to yield an estimated annual savings of approximately $8
million.
Selling, general and administrative expenses for the nine months ended June
29, 1996 remained the same as the comparable period of the prior year.
Interest expense, net of interest income, for the nine months ended June
29, 1996 was $4.8 million compared to $2.4 million for the corresponding period
last year. The increase was due to higher average borrowings as well as higher
interest rates.
Liquidity and Capital Resources
Working capital was $(1.1) million at June 29, 1996 compared to $72.9
million at September 30, 1995. The incurrence of additional indebtedness
pursuant to a new revolving credit agreement and subordinated notes during the
nine month period was offset by the reclassification of this long-term debt as
current due to the technical default mentioned below resulting in the decrease
in working capital.
In January 1996, the Company issued 10% subordinated notes to Avondale
Mills, Inc. and Robert Gintel in the aggregate principal amount of $15.0 million
maturing February 26, 1999, concurrently with the funding of the Company's new
bank credit facility. The notes are subordinate to the Company's bank debt and
certain other senior debt. The proceeds from issuance of the subordinated notes
have been used for working capital and capital expenditures.
<PAGE>
In January 1996, the Company borrowed $60.0 million under a new revolving
credit agreement with its banks of which $57.0 million was outstanding on June
29, 1996. The proceeds of the new debt were used to pay off an existing bank
credit facility and existing short-term bank lines totaling $50.0 million. The
additional proceeds were used for working capital and capital expenditures. The
new revolving line of credit is collateralized by inventories and accounts
receivable and has a maturity date of January 26, 1999. At June 29, 1996, the
Company was not in compliance with certain financial covenants arising under the
new revolving credit agreement and under a loan agreement with an institutional
lender. Accordingly, these obligations, $57.0 million and $4.6 million,
respectively, are subject to acceleration by the lenders and have been
classified as current liabilities. Also classified as current liabilities under
a cross default provision with the revolving credit agreement are the
subordinated notes discussed above in the amount of $15 million. The Company has
received a letter from its banks expressing a willingness to negotiate an
amendment to the new credit facility by modifying the financial covenant
requirements and extend the collateral to include the Company's property, plant
and equipment; however, there is no assurance that any proposed amendment can be
finalized on terms satisfactory to the Company or otherwise. No such
communication has been received from the institutional lender or the
subordinated note holders.
Capital expenditures were $0.7 million for the three month period ended
June 29, 1996 and $7.4 million for the nine month period ended June 29, 1996 and
primarily were directed to the expansion of the Company's new textile
manufacturing plant in Fayette, Alabama.
The Company's future liquidity requirements are expected to consist
primarily of capital expenditures and seasonal working capital requirements. The
Company's liquidity requirements are expected to be financed from operating cash
<PAGE>
flow and existing debt arrangements, as amended or refinanced. No assurance can
be given that sufficient debt financing will be available to the Company on
satisfactory terms or at all. The Company has reduced its work in process and
finished goods inventories as well as its overall operating costs. In the past
four months, annualized operating costs have been reduced by $8 million and
inventory levels have been reduced to $57.2 million. The Company intends to
continue to focus on these areas, as well as sales and marketing, manufacturing
and quality improvements, in the coming months. The reduction in inventory and
operating costs is expected to generate sufficient liquidity to meet the
Company's obligations, however, no assurance can be given that will be the case.
Effects of Inflation
The Company believes that the relatively moderate rates of inflation in
recent years have not had a significant impact on its sales and profitability.
<PAGE>
ONEITA INDUSTRIES, INC. AND SUBSIDIARIES
PART II - OTHER INFORMATION
Item 1 Legal Proceedings
None
Item 2 Changes in Securities
None
Item 3 Defaults upon Senior Securities
See "Management's Discussion and Analysis of Financial
Condition and Results of Operations - Liquidity and Capital
Resources."
Item 4 Submission of Matters to a Vote of Security Holders
None
Item 5 Other Information
None
Item 6 Exhibits and Reports on Form 8-K
(a) Exhibits
27. Financial Data Schedule
(b) Reports on Form 8-K during the quarter ended June 29,
1996.
None
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ONEITA INDUSTRIES, INC.
By: /s/ C. Michael Billingsley
C. Michael Billingsley
President and Chief Executive
Officer
By: /s/ E. Franklin Impson, Jr.
E. Franklin Impson, Jr.
Vice-President and Controller
(Principal Accounting Officer)
Date: August 13, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information extracted from the condensed
consolidated financial statements for the quarter ended June 29, 1996 and is
qualified in its entirety by reference to such statements.
In thousands except per share amounts.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-28-1996
<PERIOD-END> JUN-29-1996
<CASH> 4,896
<SECURITIES> 0
<RECEIVABLES> 39,157
<ALLOWANCES> 1,236
<INVENTORY> 56,665
<CURRENT-ASSETS> 102,266
<PP&E> 72,323
<DEPRECIATION> 26,282
<TOTAL-ASSETS> 150,879
<CURRENT-LIABILITIES> 103,412
<BONDS> 3,592
0
0
<COMMON> 1,750
<OTHER-SE> 42,125
<TOTAL-LIABILITY-AND-EQUITY> 150,879
<SALES> 133,635
<TOTAL-REVENUES> 133,635
<CGS> 145,119
<TOTAL-COSTS> 145,119
<OTHER-EXPENSES> 20,232
<LOSS-PROVISION> 400
<INTEREST-EXPENSE> 4,788
<INCOME-PRETAX> (36,904)
<INCOME-TAX> (2,939)
<INCOME-CONTINUING> (33,965)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (33,965)
<EPS-PRIMARY> (4.94)
<EPS-DILUTED> (4.94)
</TABLE>
