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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.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 December 28, 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. 9,149,339 shares of
Common Stock as of January 31, 1997.
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FORM 10-Q
TABLE OF CONTENTS
<TABLE>
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PART I - FINANCIAL INFORMATION (Unaudited)
Item 1: Financial Statements:
Condensed Consolidated Balance Sheets at
December 28, 1996 and September 28, 1996 ................ 1
Condensed Consolidated Statements of Operations for the
Three Months Ended December 28, 1996 and
December 30, 1995 ....................................... 2
Condensed Consolidated Statements of Cash Flows for
the Three Months Ended December 28, 1996
and December 30, 1995 ................................... 3
Notes to Condensed Consolidated Financial Statements .... 4
Item 2: Management's Discussion and Analysis of Financial
Condition and Results of Operations ................ 6
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 .................... 11
Signature ................................................... 12
</TABLE>
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ONEITA INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
<TABLE>
<CAPTION>
December 28, September 28
1996 1996
------------ ------------
(Unaudited) (Note 1)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash $ 11,535 $ 9,135
Refundable income tax 1,988 1,988
Accounts receivable, less
allowance for doubtful accounts 18,394 25,675
Inventories (Note 2) 38,193 43,883
Prepaid expenses and other
current assets 252 223
-------- --------
Total current assets 70,362 80,904
PROPERTY, PLANT AND EQUIPMENT, at cost,
less accumulated depreciation and
amortization 43,998 46,244
OTHER ASSETS 2,188 2,377
-------- --------
$116,548 $129,525
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Long-term debt in technical default,
classified as current $ 67,577 $ 69,115
Current portion of long-term debt
and capital leases 4,620 4,922
Accounts payable 5,496 9,016
Accrued liabilities 9,836 11,433
-------- --------
Total current liabilities 87,529 94,486
CAPITAL LEASE OBLIGATIONS 3,015 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,
9,269,739 shares issued and
outstanding at December 28, 1996
and September 28, 1996 2,318 2,318
Other shareholders' equity 23,686 29,596
-------- --------
$116,548 $129,525
======== ========
</TABLE>
See notes to condensed consolidated financial statements.
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ONEITA INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended
-------------------------------
December 28, December 30,
1996 1995
------------ ------------
<S> <C> <C>
Net sales $ 33,897 $ 35,187
Cost of sales 34,639 34,633
-------- --------
Gross profit (742) 554
Selling, general and administrative
expenses 3,288 4,693
-------- --------
Loss from operations (4,030) (4,139)
Interest expense 1,880 1,300
-------- --------
Loss before provision for
income taxes (5,910) (5,439)
Benefit for income taxes -- (2,065)
-------- --------
Net loss $ (5,910) $ (3,374)
======== ========
Net loss per share (Note 3) $ (.65) $ (.49)
======== ========
</TABLE>
See notes to condensed consolidated financial statements.
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ONEITA INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
Three Months Ended
----------------------------
December 28, December 30,
1996 1995
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (5,910) $(3,374)
Adjustments to reconcile net loss
to net cash provided by (used in)
operating activities:
Depreciation and amortization 1,633 1,588
Provision for losses on accounts receivable 17 --
Increase in deferred income taxes -- 388
Change in assets and liabilities 8,659 30
-------- -------
Net cash provided by (used in)
operating activities 4,399 (1,368)
-------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property, plant and equipment (559) (2,516)
Decrease in equipment lease deposits -- 642
Proceeds from sale of property, plant
and equipment 510 2
-------- -------
Net cash used in investing activities (49) (1,872)
-------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Short-term borrowings -- 2,000
Proceed from issuance of long-term debt -- 219
Payment of long-term debt and capital
lease obligations (1,950) (1,633)
Other -- (50)
-------- -------
Net cash (used in) provided by
financing activities (1,950) 536
-------- -------
NET INCREASE (DECREASE) IN CASH 2,400 (2,704)
CASH AT BEGINNING OF PERIOD 9,135 2,749
-------- -------
CASH AT END OF PERIOD $ 11,535 $ 45
======== =======
</TABLE>
See notes to condensed consolidated financial statements.
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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 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.
The Company incurred a net loss of $53,693 for the year ended September
28, 1996. Market pressures that resulted in reduced sales volumes and prices and
operating losses during the year ended September 28, 1996 are continuing in
fiscal 1997. Management's operating plans include continuing its costs reduction
program and concentrating the manufacturing and sales efforts on a more
profitable product mix. The Company reduced its administrative and supervisory
staff by approximately 150 persons which is expected to yield an estimated
annual savings of approximately $10,000. In 1997, cost of goods sold is expected
to be reduced due to the discontinued use of contractors, who in 1995 and 1996
produced most of the Company's specialty products. Inventories of $83,700 at
December 1995 were reduced by 54% to $38,200 at December 1996. Accounts
receivable days outstanding were reduced by one third on a quarterly basis.
Product quality and responsiveness to the needs of our customers have improved.
The Company was not in compliance with certain terms of its long-term
revolving credit agreement and loan agreement with an institutional lender at
December 28, 1996 and continues to be in non-compliance. Accordingly, these
obligations, $57,000 and $3,077, 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 $7,500.
The Company has been advised that the lending banks under the Company's
revolving credit agreement have assigned their interest to third parties. The
Company has not yet met with these third parties. No assurance can be given that
the Company will be successful in negotiating a
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restructuring of its existing debt agreements on terms satisfactory to such
third parties or its remaining institutional lender.
In the event that sufficient financing cannot be arranged in a timely
manner, 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 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-month period ended December 28, 1996 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.
(2) Inventories -
Inventories, stated at the lower of cost (primarily last-in, first-out)
or market, are comprised of the following:
<TABLE>
<CAPTION>
December 28, September 28,
1996 1996
------------ -------------
<S> <C> <C>
Finished goods ........................... $28,029 $31,774
Work in process .......................... 7,734 9,287
Raw materials and supplies ............... 2,430 2,822
------- -------
$38,193 $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 6,883,598 for the three months ended December 28, 1996 and December 30,
1995, respectively.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Results of Operations
Net sales for the three months ended December 28, 1996 were $33.9 million
as compared to $35.2 million in the comparable period of the prior year, a
decrease of $1.3 million or 3.7%. The decrease was due primarily to reduced
selling prices of $3.0 million related to the sale at discounted prices of
excess inventories offset in part by higher unit sales of $1.7 million.
Gross profit for the quarter ended December 28, 1996 of $(0.7) million
decreased $1.3 million from the comparable period of the prior year. Gross
profit, as a percentage of net sales, decreased to (2.2)% compared to 1.6% in
the comparable period of the prior year primarily due to lower selling prices.
The reduction in gross profit was caused by discounted sales prices mentioned
above and unfavorable absorption of fixed cost caused by reduced operating
schedules offset by generally lower operating cost as a result of the Company's
cost reduction program discussed in Note 2 of Notes to Condensed Consolidated
Financial Statements.
Selling, general and administrative expenses for the three months ended
December 28, 1996 decreased $1.4 million from the comparable period of the prior
year as a result of the Company's cost reduction program discussed in Note 1 of
Notes to Condensed Consolidated Financial Statements.
Interest expense, net of interest income, for the first quarter of 1996
was $1.9 million compared to $1.3 million for the corresponding period last
year. The increase was due primarily to higher borrowing rates. At December 28,
1996, the Company was not in compliance with certain terms of its revolving
credit agreement and accordingly interest of 11% has been paid during the
default period.
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Liquidity and Capital Resources
Working capital was $(17.2) million at December 28, 1996 compared to
$(13.6) million at September 28, 1996.
Net cash provided by operating activities for the quarter ended December
28, 1996 was $4,399. The primary components were from reductions in inventory of
$5,690 and accounts receivable of $7,281. This was offset by a decrease in
accounts payable and accrued liabilities of $5,117 and by the net loss (adjusted
for depreciation and amortization.) The primary component of cash used in
operating activities in 1995 was the net loss adjusted for depreciation and
amortization.
Cash used in investing activities for the quarter ended December 28, 1996
consisted of capital expenditures of net of proceeds from the sale of property
and equipment.
In January 1996, the Company entered into a $60,000 revolving credit
agreement with its banks. At December 28, 1996, $57,000 was outstanding under
this agreement. The revolving line of credit is collateralized by inventories
and account receivables and has a maturity date of January 26, 1999. At December
28, 1996, the Company was not and is not presently in compliance with certain
financial covenants arising under the revolving credit agreement and under a
loan agreement with an institutional lender and there existed a $31,000
collateral deficiency under the agreements as related to borrowing capacity.
Previously, the Company had commenced negotiations with its existing lenders to
restructure its debt agreements by modifying the financial covenant requirements
and extending the collateral to include the Company's plant and equipment. The
Company now has been advised that the lending banks under its revolving credit
agreement have assigned their interest to third parties. The Company has not yet
met with these third parties and 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 remaining institutional lender.
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
flow and existing debt arrangements, as amended or refinanced. While cash from
operations are expected to be adequate to meet the Company's liquidity
requirement, 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, 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.
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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 $10,000;
inventory levels have been reduced from $83,725 at December 30, 1995 to $38,193
at December 28, 1996, and accounts receivable days outstanding were reduced by
one third on a quarterly basis. 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 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.
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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
None
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) No Exhibits on Form 8-K were filed during this quarterly
period.
(b) No Reports on Form 8-K were filed during this quarterly
period.
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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: February 10, 1997
12
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information extracted from the condensed
consolidated financial statements for the quarter ended December 28, 1996 and is
qualified in its entirety by reference to such statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-27-1997
<PERIOD-END> DEC-28-1996
<CASH> 11,535
<SECURITIES> 0
<RECEIVABLES> 19,494
<ALLOWANCES> 1,100
<INVENTORY> 38,193
<CURRENT-ASSETS> 70,362
<PP&E> 70,365
<DEPRECIATION> 26,367
<TOTAL-ASSETS> 116,548
<CURRENT-LIABILITIES> 87,529
<BONDS> 3,015
0
0
<COMMON> 2,318
<OTHER-SE> 23,686
<TOTAL-LIABILITY-AND-EQUITY> 116,548
<SALES> 33,897
<TOTAL-REVENUES> 33,897
<CGS> 34,639
<TOTAL-COSTS> 34,639
<OTHER-EXPENSES> 3,271
<LOSS-PROVISION> 17
<INTEREST-EXPENSE> 1,880
<INCOME-PRETAX> (5,910)
<INCOME-TAX> 0
<INCOME-CONTINUING> (5,910)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (5,910)
<EPS-PRIMARY> (0.65)
<EPS-DILUTED> (0.65)
</TABLE>
