<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 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 March 29, 1997
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)
<TABLE>
<S> <C>
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)
</TABLE>
(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. 9,149,339 shares of
Common Stock as of April 30, 1997.
<PAGE> 2
FORM 10-Q
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION (Unaudited)
<TABLE>
<S> <C>
Condensed Consolidated Balance Sheets at
March 29, 1997 & September 28, 1996 .................... 1
Condensed Consolidated Statements of Operations for
the Three Months Ended March 29, 1997 and
March 30, 1996 ......................................... 3
Condensed Consolidated Statements of Operations for
the Six Months Ended March 29, 1997 and
March 30, 1996 ......................................... 4
Condensed Consolidated Statements of Cash Flows for
the Six Months Ended March 29, 1997 and
March 30, 1996 ......................................... 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 ............................. 11
Item 2: Changes in Securities ......................... 11
Item 3: Defaults upon Senior Securities ............... 11
Item 4: Submission of Matters to a Vote of Security
Holders ....................................... 11
Item 5: Other Information ............................. 11
Item 6: Exhibits and Reports on Form 8-K .............. 12
Signature .............................................. 13
</TABLE>
<PAGE> 3
ONEITA INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
<TABLE>
March 29, September 28,
1997 1996
---------- -------------
(Unaudited) (Note 1)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash $ 6,270 $ 9,135
Refundable income tax -- 1,988
Accounts receivable, less
allowance for doubtful accounts 22,054 25,675
Inventories (Note 2) 36,689 43,883
Prepaid expenses and other
current assets 234 223
-------- --------
Total current assets 65,247 80,904
PROPERTY, PLANT AND EQUIPMENT,
at cost, less accumulated
depreciation and amortization 43,069 46,244
OTHER ASSETS 3,539 2,377
-------- --------
$111,855 $129,525
======== ========
</TABLE>
See notes to condensed consolidated financial statements.
1
<PAGE> 4
ONEITA INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
<TABLE>
<CAPTION>
March 29, September 28,
1997 1996
----------- -------------
(Unaudited) (Note 1)
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of capital
lease obligations $ 1,404 $ 1,845
Long-term debt in default
classified as current 70,654 72,192
Accounts payable 5,095 9,016
Accrued liabilities 11,250 11,433
-------- --------
Total current liabilities 88,403 94,486
CAPITAL LEASE OBLIGATIONS 2,687 3,125
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,
9,149,339 shares outstanding at
March 29, 1997 and 9,269,739 shares
outstanding at September 28, 1996 2,287 2,318
Other shareholders' equity 18,478 29,596
-------- --------
$111,855 $129,525
======== ========
</TABLE>
See notes to condensed consolidated financial statements.
2
<PAGE> 5
ONEITA INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended
-------------------------
March 29, March 30,
1997 1996
-------- ---------
<S> <C> <C>
Net sales $ 32,515 $ 43,236
Cost of sales 32,438 56,718
-------- --------
Gross profit 77 (13,482)
Selling, general and administrative 3,374 5,818
expenses
Consolidation and restructuring charges -- 5,301
-------- --------
Loss from operations (3,297) (24,601)
Interest expense, net of interest
income of $125 in 1997 and
$202 in 1996 1,942 1,621
-------- --------
Loss before benefit for income taxes (5,239) (26,222)
Benefit for income taxes -- (874)
-------- --------
Net loss $ (5,239) $(25,348)
======== ========
Net loss per share(Note 3) $ (.57) $ (3.68)
======== ========
</TABLE>
See notes to condensed consolidated financial statements.
3
<PAGE> 6
ONEITA INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per share data)
<TABLE>
<CAPTION>
Six Months Ended
-------------------------
March 29, March 30,
1997 1996
--------- ---------
<S> <C> <C>
Net sales $ 66,412 $ 78,423
Cost of sales 67,077 91,351
-------- --------
Gross profit (665) (12,928)
Selling, general and administrative
expenses 6,662 10,511
Consolidation and restructuring charges -- 5,301
-------- --------
Loss from operations (7,327) (28,740)
Interest expense, net of interest
income of $270 in 1997 and
$266 in 1996 3,822 2,921
-------- --------
Loss before benefit for income taxes (11,149) (31,661)
Benefit for income taxes -- (2,939)
-------- --------
Net loss $(11,149) $(28,722)
======== ========
Net loss per share ( Note 3 ) $ (1.22) $ (4.17)
======== ========
</TABLE>
See notes to condensed consolidated financial statements.
4
<PAGE> 7
ONEITA INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
Six Months Ended
-------------------------
March 29, March 30,
1997 1996
-------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(11,149) $(28,722)
Adjustments to reconcile net loss
to net cash provided by (used in) operating
activities:
Depreciation and amortization 3,314 2,889
Consolidation charges -- 3,676
Provision for losses on accounts receivable 17 200
Decrease in deferred income taxes -- (1,621)
Change in assets and liabilities 8,074 7,361
-------- --------
Net cash provided by (used in) operating
activities 256 (16,217)
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property, plant and equipment (1,235) (6,682)
Decrease in equipment lease deposits -- 883
Proceeds from sale of property, plant
and equipment 531 58
-------- --------
Net cash used in investing activities (704) (5,741)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Short-term borrowings -- 2,000
Proceeds from issuance of long-term debt -- 20,219
Payment of long-term debt and capital
lease obligations (2,417) (1,960)
-------- --------
Net cash (used in) provided by
financing activities (2,417) 20,259
-------- --------
NET DECREASE IN CASH AND CASH EQUIVALENTS (2,865) (1,699)
CASH AT BEGINNING OF PERIOD 9,135 2,749
-------- --------
CASH AT END OF PERIOD $ 6,270 $ 1,050
======== ========
</TABLE>
See notes to condensed consolidated financial statements.
5
<PAGE> 8
ONEITA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(1) Basis of Presentation -
Oneita Industries, Inc. (the Company) manufacturers and markets high
quality activewear including T-shirts and fleecewear, and infantswear primarily
for the newborn and toddler markets. These products are marketed to the
imprinted sportswear industry and to major retailers.
The Company incurred net losses of $53.7 million and $11.1 million
respectively for the year ended September 28, 1996 and for the six months ended
March 29, 1997. Market pressures that resulted in reduced sales volumes and
prices and operating losses during those periods are continuing into the second
half of fiscal 1997. Management's operating plans include continuing its cost
reduction program, pursuing a further consolidation of operations and
concentrating the manufacturing and sales efforts on a more profitable product
mix. Inventories of $69.1 million at March 1996 were reduced by 47% to $36.7
million at March 1997. Product quality and responsiveness to the needs of the
Company's customers have improved.
At March 29, 1997, the Company was in default and not in compliance
with debt repayment obligations and certain other terms of its long-term
revolving credit agreement and continues to be in default and non-compliance.
Also, at March 29, 1997, the Company was, and continues to be, not in
complicance with certain terms of its loan agreement with an institutional
lender and at May 16, 1997 was in default of debt repayment obligations to this
lender. Accordingly, these obligations, $57.0 million and $6.2 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
subordinated notes held by Robert M. Gintel, Chairman of the Board, in the
amount of $7.5 million.
The institutional lender has advised the Company of its intention to
declare all of the indebtedness due it to be due and payable on May 27, 1997
unless such defaults and noncompliance are cured by that date. The lending
banks under the Company's revolving credit agreement have assigned their
interest to third parties. These third parties have indicated they are prepared
to enter into a standstill/forbearance agreement. The Company will be meeting
with such parties to address the Company's strategic plans with a view to
restructuring the loan agreement. The Company has also provided the proposed
standstill/forbearance agreement to its institutional lender and hopes to meet
with such lender to address its strategic plans with a view to restructuring
this loan agreement. No assurance can be given that the Company will be
successful in negotiating a restructuring of its existing debt agreements on
terms satisfactory to such third parties or its institutional lender. In the
event the Company cannot
6
<PAGE> 9
successfully restructure its debt agreements, it may be required to seek relief
from its creditors under applicable federal and state laws.
In the event that sufficient financing cannot be arranged in a timely
manner, in order to meet its liquidity requirements the Company may be required
to further reduce inventory levels in advance of planned deliveries by either
further curtailment of production or by accelerating customer deliveries through
discounting of prices below its inventory and production costs.
The accompanying 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 28, 1996 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 and six-month periods ended March 29, 1997 are not necessarily indicative
of the results that may be expected for the year ended September 27, 1997. 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 28, 1996.
In addition, the accompanying consolidated financial statements have
been prepared on the basis of accounting principles applicable to a going
concern and contemplates the realization of assets and the settlement of
liabilities and commitments in the normal course of business. The accompanying
consolidated financial statements do not include any adjustments relating to
the recoverability and classification of recorded asset amounts or the amounts
and classification of liabilities that might result should the Company be
unable to continue as a going concern.
(2) Inventories -
Inventories, stated at the lower of cost (primarily last-in, first-out)
or market, are comprised of the following (dollars in thousands):
<TABLE>
<CAPTION>
March 29, September 28,
1997 1996
--------- -------------
<S> <C> <C>
Finished goods .................... $26,230 $31,774
Work in process ................... 7,973 9,287
Raw materials and supplies......... 2,486 2,822
------- -------
$36,689 $43,883
======= =======
</TABLE>
(3) 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 9,149,339
and 6,883,695 for the three months ended March 29, 1997 and March 30, 1996,
respectively and 9,149,339 and 6,883,647 for the six months ended March 29, 1997
and March 30, 1996, respectively.
7
<PAGE> 10
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Results of Operations
Net sales for the three months ended March 29, 1997 were $32.5 million
as compared to $43.2 million in the comparable period of the prior year, a
decrease of $10.7 million or 24.8%. $8.7 million of the sales decrease was
attributable to lower units sold reflecting high inventory balances in
customers' warehouses and increased competition in the marketplace. Lower unit
selling prices further reduced sales by $2.0 million and was caused by
continued production overcapacity in the industry and by lower priced imports.
Gross profit for the quarter ended March 29, 1997 of $0.1 million
increased $13.6 million from the comparable period of the prior year. The
increase was due to improved manufacturing efficiencies and cost reductions
totaling $5.1 million as well as 1996 second quarter inventory writedowns of
$10.5 million, net, offset by lower sales prices of $2.0 million. Gross profit,
as a percentage of net sales, increased to 0.2% compared to (31.2)% in the
comparable period of the prior year.
Selling, general and administrative expenses for the three months ended
March 29, 1997 decreased $2.4 million from the comparable period of the prior
year. The decrease was due to lower personnel costs of $0.9 million and reduced
advertising and product development costs of $0.6 million, both as a result of
the Company's cost reduction plan as previously announced. Other cost reductions
realized in the six months were offset by increases in loan cost amortization
and loan restructuring costs of $0.4 million.
Interest expense, net of interest income, for the second quarter of
1997 was $1.9 million compared to $1.6 million for the corresponding period last
year. The increase was due primarily to higher borrowing rates.
Net sales for the six months ended March 29, 1997 were $66.4 million as
compared to $78.4 million in the comparable period of the prior year, a
decrease of $12.0 million or 15.3%. The decrease was due primarily to lower
units sold of $7.7 million as well as by lower unit selling prices of $4.3
million.
Gross profit for the six months ended March 29, 1997 of $(0.6) million
increased $12.3 million from the comparable period of the prior year. The
increase was due to improved manufacturing efficiencies and cost reductions of
$7.1 million as well as the 1996 inventory writedowns of $9.5 million, net,
offset by lower sales prices of $4.3 million. Gross profit, as a percentage of
net sales, increased to (1.0)% compared to (16.5)% in the comparable period of
the prior year.
Selling, general and administrative expenses for the six months ended
March 29, 1997 decreased $3.8 million from the comparable period of the prior
year. The decrease was due to lower personnel costs of $1.6 million and reduced
advertising and product development costs of $1.2 million, both as a result of
the Company's cost reduction plan as previously announced.
8
<PAGE> 11
Other costs reductions realized in the six months were offset by increases in
loan cost amortization and loan restructuring costs of $0.5 million.
Interest expense, net of interest income, for the six months ended March
29, 1997 was $3.8 million as compared to $2.9 million in the comparable period
of the prior year. The increase was due primarily to higher borrowing rates.
Liquidity and Capital Resources
Working capital was $(23.2) million at March 29, 1997 compared to $(13.6)
million at September 28, 1996.
Net cash provided by operating activities for the six months ended
March 29, 1997 was $0.3 million. The primary components were reductions of
inventory of $7.2 million and accounts receivable of $5.6 million. This was
offset by a decrease in accounts payable and accrued liabilities of $4.1
million and by the net loss adjusted for depreciation and amortization.
Cash used in investing activities the first six months of 1997 consisted
of capital expenditures of $1.2 million partially offset by proceeds from the
sale of property and equipment.
In January 1996, the Company entered into a $60.0 million revolving
credit agreement with its banks. At March 29, 1997, $57.0 million was
outstanding under this agreement. The revolving line of credit is
collateralized by inventories and accounts receivable and has a maturity date
of January 26, 1999. At March 29, 1997, the Company was, and continues to be,
in default and not in compliance with certain debt repayment obligations and
other financial covenants arising under the revolving credit agreement and
there existed a $29.8 million collateral deficiency under the agreement as
related to borrowing capacity. Also, at March 29, 1997, the Company was, and
continues to be, not in compliance with certain terms of its loan agreement
with an institutional lender and at May 16, 1997 was in default of debt
repayment obligations to this lender. The institutional lender has advised the
Company of its intention to declare all of the indebtedness due it to be due
and payable on May 27, 1997 unless such defaults and noncompliance are cured by
that date. The lending banks under the Company's revolving credit agreement
have assigned their interest to third parties. These third parties have
indicated they are prepared to enter into a standstill/forbearance agreement.
The Company be meeting with such parties to address the Company's strategic
plan with a view to restructuring the loan agreement. The Company has also
provided the proposed standstill/forbearance agreement to its institutinal
lender and hopes to meet with such lender to address its strategic plans with a
view to restructuring this loan agreement. No assurance can be given that the
Company will be successful in negotiating a restructuring of its debt
agreements with such third parties or its institutional lender. In the event
the Company cannot successfully restructure its debt agreements, it may be
required to seek relief from its creditors under applicable federal and state
laws.
9
<PAGE> 12
The Company's future liquidity requirements are expected to consist
primarily of capital expenditures and working capital requirements. The
Company's liquidity requirements are expected to be financed from operating cash
flow and existing debt arrangements, as amended or refinanced. No assurance can
be given that sufficient financing will be available to the Company on
satisfactory terms or at all.
In the event that sufficient financing cannot be arranged in a timely
manner, in order to meet its liquidity requirements the Company may be required
to further reduce inventory levels in advance of planned deliveries by either
further curtailment of production or by accelerating customer deliveries through
the additional discounting of prices below its inventory and production costs.
The Company has reduced its work in process and finished goods
inventories as well as its overall operating costs during the last twelve
months. Annualized operating costs have been reduced by approximately $15.0
million; inventory levels have been reduced from $69.1 million at March 30,
1996 to $36.7 million at March 29, 1997, and accounts receivable days
outstanding were reduced by one third. Product quality and responsiveness to
the needs of our customers have improved. The Company will continue to focus
on these areas, as well as on improvements in sales and marketing,
manufacturing and quality control in the second half of fiscal 1997. No
assurance can be given that these reductions will generate sufficient
liquidity to meet the Company's objectives.
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.
10
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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
(a) The Registrant held its Annual Meeting of
Stockholders on February 27, 1997.
(b) Eight directors were elected at the Annual Meeting to
serve until the Annual Meeting of Stockholders in
1998. The names of these Directors and votes cast in
favor of their election and shares withheld are as
follows:
<TABLE>
<CAPTION>
NAME VOTES FOR VOTES WITHHELD
---- --------- --------------
<S> <C> <C>
Robert M. Gintel 8,650,288 70,302
Jack R. Altherr, Jr. 8,649,046 71,544
C. Michael Billingsley 8,649,046 71,544
G. Stephen Felker 8,649,046 71,544
Meyer A. Gross 8,650,288 70,302
John G. Hudson 8,649,046 71,544
H. Varnell Moore 8,650,288 70,302
Lewis Rubin 8,650,288 70,302
</TABLE>
Item 5 Other Information
None
11
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Item 6 Exhibits and Reports on Form 8-K
27. Financial Data Schedule
No Exhibits or Reports on Form 8-K were filed during
this quarterly period.
12
<PAGE> 15
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/ William H. Boyd
William H. Boyd
Vice President and Treasurer
(Principal Financial Officer)
Date: May 16, 1997
13
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS FOR THE QUARTER ENDED MARCH 29,1997 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-27-1997
<PERIOD-END> MAR-29-1997
<CASH> 6,270
<SECURITIES> 0
<RECEIVABLES> 22,932
<ALLOWANCES> 878
<INVENTORY> 36,689
<CURRENT-ASSETS> 65,247
<PP&E> 70,694
<DEPRECIATION> 27,625
<TOTAL-ASSETS> 111,855
<CURRENT-LIABILITIES> 88,403
<BONDS> 2,687
0
0
<COMMON> 2,287
<OTHER-SE> 18,478
<TOTAL-LIABILITY-AND-EQUITY> 111,855
<SALES> 66,412
<TOTAL-REVENUES> 66,412
<CGS> 67,077
<TOTAL-COSTS> 67,077
<OTHER-EXPENSES> 6,645
<LOSS-PROVISION> 17
<INTEREST-EXPENSE> 3,822
<INCOME-PRETAX> (11,149)
<INCOME-TAX> 0
<INCOME-CONTINUING> (11,149)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (11,149)
<EPS-PRIMARY> (1.22)
<EPS-DILUTED> (1.22)
</TABLE>
