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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended September 27, 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 No. 1-9734
ONEITA INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
Delaware 57-0351045
(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification Number)
4130 Faber Place Drive, Suite 200 29405
Ashley Corporate Center (Zip Code)
Charleston, SC
Registrant's telephone number including area code: (803) 529-5225
Securities registered pursuant to Section 12(b) of the act:
<TABLE>
<S> <C>
Title of Class Name of Each Exchange on which registered
Common Stock, $.25 par value New York Stock Exchange
</TABLE>
Securities registered pursuant to Section 12(g) of the Act: None
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 (or for such shorter
period that the Registrant was required to file such report) and (2) has
been subject to such filing requirements for the past 90 days: Yes [X]
No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant
to Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of Registrant's knowledge in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-K or any amendment to this form 10-K: [ ]
The aggregate market value of the voting stock held by
nonaffiliates of the Registrant, as of November 28, 1997 was
approximately $2,300,000.
The number of shares outstanding of each of the Registrant's
classes of Common Stock, as of November 28, 1997 was 9,149,339 shares.
Documents incorporated by reference: Part III - Registrant's
definitive proxy statement to be filed pursuant to Regulation 14-A of the
Securities Exchange Act of 1934.
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PART I
ITEM ONE - BUSINESS (Dollars in thousands)
Oneita Industries, Inc. (the "Company" or "Oneita") manufactures and
markets high quality activewear and infantswear. Oneita's activewear includes
T-shirts and sweatshirts for screen printing sold under the Oneita Power-T(R),
Oneita Power 50 Plus(R), Oneita Power-Sweats(R) and Oneita Colorwear(TM) brand
names. The Company estimates that it is the fourth largest manufacturer of
branded imprinted T-shirts in the United States. Oneita's infantswear includes
layette and playwear sold primarily under private labels. Activewear products
are marketed to the imprinted sportswear industry and to retailers and
infantswear products are marketed to major retailers.
Since 1987, Oneita has achieved growth by building a brand name activewear
and infantswear business with a high quality image. As a result of realigning
its product mix to concentrate on these products, the Company's net sales of
activewear increased from $37,400 in 1987 to $137,500 and $112,900 in 1996 and
1997, respectively, and net sales of infantswear increased from $14,200 in 1987
to $30,800 and $22,100 in 1996 and 1997, respectively.
Oneita expanded its activewear products by introducing sweatshirts in 1991
under the Oneita Power-Sweats label. Sweatshirts accounted for approximately
$16,900 and $8,300 of the activewear sales in 1996 and 1997, respectively. In
infantswear, Oneita has focused on developing a variety of products, each
targeted at specific retail markets, including department stores, chain stores
and mass merchandisers.
PRODUCTS
Oneita manufactures and markets T-shirts and sweatshirts (activewear) for
the imprinted sportswear (screenprint) industry. Screen printing consists of
imprinting designs, patterns or letters ranging from simple lettering to complex
color patterns on apparel. Oneita's T-shirts, in management's opinion, are of
high quality because they are heavy in weight, have full cut specifications and
possess long-lasting construction features such as shoulder-to-shoulder taping
and a seamless tubular collar design.
Oneita introduced sweatshirts in 1991 to its activewear line under the
Oneita Power-Sweats label. The Company sells sweatshirts to the same customers
to whom it sells T-shirts and believes that its ability to do so may result in
stronger relationships with such customers and the addition of new customers for
both T-shirts and sweatshirts. In 1996, the ONEITA'S KIDS line was expanded with
new styles of fleecewear and T-shirts.
Historically, Oneita's business has been seasonal with respect to T-shirt
sales to the extent that approximately 50% of annual T-shirt sales have been in
the March through June period. Sweatshirts provide a seasonal balance for Oneita
since its customers tend to stock higher levels of T-shirts in the spring and
summer months and higher levels of sweatshirts in the fall and winter months.
The Company sells activewear through in-house salespersons to approximately
330 customers located throughout the United States, including 50 distributors.
The Company also sells activewear to distributors in Europe, Canada and the
Pacific Rim. Such export sales accounted for approximately $2,000 of net sales
in both 1996 and 1997.
The Company estimates that the branded imprinted T-shirt market exceeds
$3.5 billion in sales annually and believes it is the fourth largest
manufacturer of branded imprinted T-shirts in the United States. The market for
T-shirts for the screen printing industry is very competitive and is based upon
quality, service, price, availability of product and name recognition. Oneita's
primary competitors, Fruit of the Loom, Inc., Russell Corporation and Sara Lee
Knit Products (a subsidiary of Sara Lee Corporation) are larger, have
substantially greater resources and in the aggregate account for a majority of
the T-shirt market.
Oneita believes that it competes favorably in quality, price, customer
service and availability of product. While in prior years, foreign competition
did not have a material effect on the sale of activewear within the U. S.
market, recent years have seen increases in the importation of T-shirts from 29%
in 1994 to 37% in 1996 of T-shirts sold. In order to reduce inventory levels and
in response to competitive market conditions, the Company reduced its selling
prices by approximately 15% in 1996 and 10% in 1997.
During 1995, Oneita expanded its Power 50 Plus line (a premium T-shirt
comprised of 60% cotton and 40% polyester), enhanced its "PFD" T-shirt
collection (an all-cotton shirt that is re-dyed by customers) and also
introduced a new T-shirt, the Power Rib-T. In 1996, the PFD program was further
expanded by the offering of the Colorwear Collection, a garment dyed assortment
of both old and new styles in new colors. In
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1997 the number of activewear product offerings were reduced due to competitive
market conditions and in an effort to increase manufacturing efficiencies.
Historically, Oneita has manufactured and sold private label cotton and
cotton blend layette and playwear for infants and toddlers. Layette is apparel
for newborns while playwear is apparel for infants and toddlers up to 36 months
of age. In 1986, Oneita began to manufacture and market higher priced
infantswear under its own brand name, Soupcon. In fiscal 1996 and 1997, net
sales of infantswear under the Company's own brand names accounted for less than
5% of its total infantswear sales.
Oneita, in years prior to 1997, had license agreements with Health-tex,
Inc. to manufacture and market the Health-tex lines of layette products in the
United States and its territories and with Kessler Marketing Group, Inc. to
manufacture and market a layette line under the Mother Goose & Company
trademark. Sales of products under these license agreements declined in 1996 and
1997, and accordingly, the agreements were not renewed by the Company in 1997.
Oneita sells its private label infantswear to substantially all of the
major department stores and major retail chain stores.
Oneita has redirected its infantswear sales efforts by de-emphasizing small
orders and higher priced playwear and concentrating on sales of layette and
basic infantswear to larger customers, including mass merchandisers. The Company
markets infantswear primarily through in-house salespeople.
The infantswear market is highly competitive and consists of companies,
including William H. Carter, Gerber Products Company and Oshkosh B' Gosh, Inc.
which are larger and have substantially greater market share and resources than
the Company. The Company believes that it competes favorably with other
manufacturers of private label products as well as with other manufacturers of
high quality brand name infantswear on the basis of quality, service, price and
availability of product.
MANUFACTURING
The Company's historical strategy has been to decrease cost through
operating its facilities at maximum capacity and, from time to time, using
outside contractors to meet increased customer demand. In addition, the Company
has an on-going program to modernize its manufacturing facilities through the
addition of technologically advanced equipment. Since 1993, the Company has
added approximately $48,000 of technologically advanced machinery and equipment.
These expenditures are intended to increase manufacturing efficiencies thereby
reducing unit operating cost. Operations at the Company's new Fayette, Alabama
Textile facility commenced in October 1996 and production at this facility
currently is at approximately 90% of capacity.
The Company's manufacturing operations consist of knitting, bleaching and
dyeing, cutting and sewing, and packaging. The Company's operations begin with
raw yarns. The yarn is knitted into four basic fabric constructions (jersey,
fleece, rib and interlock) from which the Company produces its products. The
knitted fabric is batched in lots for bleaching or scoured and dyed in a variety
of both pressure and atmospheric vessels for color, consistency and quality.
Next, the finishing operation sets the width and length and pre-shrinks the
fabric. The finished fabric lots are then transported to a cutting operation
which cuts specific garment parts such as sleeves, collars, cuffs and bodies for
sewing. The cut parts are sewn together in an assembly line. Various sewing
threads, stitches, trims and colors are mixed and matched for desired styling.
The finished garments are inspected, folded and packaged. Quality assurance
systems are utilized throughout the manufacturing process to check raw
materials, in-process inventories and finished products.
During fiscal 1996, the Company closed two manufacturing plants located in
South Carolina and reduced its administrative and supervisory staff as part of a
restructuring plan to streamline and consolidate the Company's manufacturing and
administrative operations. In December 1995, the Company consolidated its five
activewear warehouse locations in South Carolina to one warehouse near Atlanta,
Georgia. The consolidation, as well as new state of the art material handling
equipment, has reduced transportation costs and lead times.
In September 1997, the Company announced a plan to further consolidate
certain of its operations in order to lower its costs and make its operations
more efficient. The consolidation will involve the closing of one facility, the
write down to estimated fair value of certain excess production equipment and
the shift of more assembly operations to existing offshore facilities. The
consolidation is expected to reduce annual operating costs, at the Company's
current production level, by $17,000.
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The Company's six remaining manufacturing facilities will be located in
South Carolina, Alabama, Jamaica and Mexico. In fiscal 1998, it is expected that
substantially all of the Company's T-shirts will be sewn in facilities located
in Jamaica and Mexico.
SALES TO MAJOR CUSTOMERS
Net sales to the Company's ten largest customers for the year ended
September 27, 1997 accounted for approximately 50% of the Company's total sales
for such period. One customer, SanMar Corporation, a distributor of activewear
for screen printing, accounted for approximately 17% of total net sales in
fiscal 1997. Net sales to the Company's five largest activewear customers in
fiscal 1997 accounted for approximately 34% of the Company's total net sales.
Net sales to the Company's five largest infantswear customers for 1997 accounted
for approximately 11% of the Company's total net sales.
EFFECT OF IMPORTS
In prior years, United States quota and tariffs restricted the quantity and
increased the cost of apparel items which foreign producers could export to the
United States. Foreign competitors, whose chief competitive advantage are lower
labor costs, tended to focus on items with high labor content, such as higher
priced sportswear. Oneita's products are not as labor intensive as other
manufactured apparel and, therefore, were less sensitive to foreign competition.
In November 1994, the United States Congress approved the North American
Free Trade Agreement ("NAFTA"), which is intended to eliminate barriers to trade
among the United States, Canada and Mexico over a ten year period. In December
1994, the Uruguay round of negotiations under the auspices of the General
Agreement on Tariffs and Trade ("GATT") was concluded. GATT will require that
quotas on apparel and textile products be phased out over a ten year period and
tariffs on such products be reduced by approximately 11% over the same ten year
period. The Company believes import competition will increase and accelerate as
quota are phased out.
Over the last several years, the Company, as well as other domestic apparel
manufacturers, moved much of its sewing operations offshore to reduce costs and
compete with increased import competition that is resulting from the trade
agreements mentioned above. The Company expects that in 1998 substantially all
of its T-shirts will be sewn in its offshore plants. The Company believes that
its 1997 consolidation of operations will combine low cost textile manufacturing
in the United States with the sewing of most of its products offshore so that
the Company can continue to be competitive.
RAW MATERIALS
The principal raw materials used in the Company's products are cotton and
cotton-blend yarns. These yarns are readily available from numerous domestic and
foreign suppliers. Market prices of cotton and cotton-blend yarns fluctuate from
time to time. In previous years, the Company has purchased quantities of these
yarns under supply contracts generally at fixed prices with various expiration
dates. At September 27, 1997, the Company was not a party to any significant
supply contracts for these cotton yarns; instead purchasing most of its current
requirements within the spot market at favorable prices. The Company may enter
into yarn contracts in 1998 depending on anticipated market prices. For the year
ended September 27, 1997 the Company purchased approximately 69% of its yarn
from Avondale Mills, Inc., the owner of 24.8% of the Company's Common Stock.
Other raw materials, such as chemicals, dyes and packaging materials, are
purchased on the open market. The sources and availability of these materials
are believed to be adequate to meet present needs.
BACKLOG
The Company's backlog of unfilled orders was approximately $11,600 at
September 27, 1997, compared with approximately $17,000 at September 28, 1996.
The amount of unfilled orders at a particular time is affected by a number of
factors. Accordingly, the amount of unfilled orders may not be indicative of
eventual shipments. The Company expects to ship substantially all of its
September 27, 1997 backlog of unfilled orders by September 30, 1998.
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TRADEMARKS AND LICENSES
The Company has registered the Oneita Power-T(R), Oneita Power 50 Plus(R),
Soupcon(R), ONEITA'S KIDS(R) and Oneita Power-Sweats(R) trademarks and certain
other trademarks. The expiration dates of these trademarks range from July 2006
to December 2008. The loss of certain of these trademarks would have a material
adverse effect upon the Company's business.
EMPLOYEES
At September 27, 1997, the Company had approximately 2,450 full time
employees. Approximately 100 of the Company's manufacturing employees are
covered by a collective bargaining agreement with the Union of Needletraders,
Industrial and Textile Employees, successor to the Amalgamated Clothing and
Textile Workers Union. The agreement expires in October 1998.
The Company considers its employee relations to be satisfactory.
EXECUTIVE OFFICERS OF THE REGISTRANT
At September 27, 1997, the executive officers of the Company were as follows:
<TABLE>
<CAPTION>
Served as
Officer
Name Age Since Positions and Offices
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<S> <C> <C> <C>
C. Michael Billingsley 46 1996 President and Chief Executive Officer
William H. Boyd 50 1986 Vice President - Administration and Treasurer
Edward I. Kramer 63 1986 Secretary
</TABLE>
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ITEM TWO - PROPERTIES (Dollars in thousands)
As of September 27, 1997, the Company occupied approximately 1,168,000
square feet of manufacturing, general office and warehouse space at its
facilities in Alabama, Georgia, New York, North Carolina, South Carolina,
Jamaica and Mexico. Approximately 621,000 square feet are under real estate
leases with aggregate minimum annual rental commitments of approximately $1,904.
Set forth below is a summary of the facilities owned or leased by the Company.
<TABLE>
<CAPTION>
Location Primary Use Square Feet
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<S> <C> <C>
Charleston, SC Administrative Offices 16,000 (a)
Andrews, SC Manufacturing 122,000
Atlanta, GA Distribution 412,000 (b)
Cullman, AL Manufacturing/Distribution 177,000
Fayette, AL Manufacturing 220,000
Kinston, NC Manufacturing 114,000 (c)
Juarez, Mexico Manufacturing 28,000 (d)
Montego Bay, Jamaica (2 locations) Manufacturing 49,000 (e)
New York, NY Sales and Marketing 4,000 (f)
</TABLE>
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(a) Premises are leased through September 1, 1999 at an annual rental of $270
per year. The Company has an option to renew for two additional five (5)
year periods.
(b) Premises are leased through November 1999 at an annual rental of $966 per
year. The Company has an option to extend the lease for an additional
five years.
(c) Premises are leased through April 30, 1998 at an annual rental of $285
per year.
(d) Premises are leased through October 1, 1999 at an annual rental of $144.
The Company has an option to purchase the premises for $900, or it may
renew the lease at the end of the lease term.
(e) Premises are leased through November 30, 2002 and June 30, 2000 at annual
rentals of $36 and $108, respectively.
(f) Premises are leased through April, 2000 at an annual rental of $95.
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The Company believes that its facilities and equipment are well
maintained and are sufficient to meet current production levels and that its
facilities are sufficient to meet anticipated sales and growth through 1998.
ITEM THREE - LEGAL PROCEEDINGS
The Company is not a party to any material pending legal proceedings.
ITEM FOUR - SUBMISSION OF MATTER TO A VOTE OF THE SECURITY HOLDERS
No matters were submitted to a vote of security holders during the fourth
quarter of fiscal 1997.
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PART II
ITEM FIVE - MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The Company's Common Stock is listed for trading on the New York Stock
Exchange under the symbol "ONA". As of November 28, 1997, there were
approximately 100 holders of record of the Company's Common Stock. The following
table shows for the periods indicated the quarterly range in the high and low
sales prices for these securities.
<TABLE>
<CAPTION>
1997 1996
------------------ --------------------
High Low High Low
<S> <C> <C> <C> <C>
Fiscal Period:
First Quarter $ 4 1/4 $ 1 1/4 $ 8 1/4 $ 6 1/8
Second Quarter 2 1/4 1 1/4 7 1/4 4 3/8
Third Quarter 1 1/2 3/8 5 3 1/8
Fourth Quarter 1 5/8 3/8 4 1/8 2 5/8
</TABLE>
No cash dividends have been paid since the Company's initial public
offering. See Note 3 to "Notes to Consolidated Financial Statements" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations - Liquidity and Capital Resources."
ITEM SIX - SELECTED FINANCIAL DATA (In thousands, except per share amounts)
<TABLE>
<CAPTION>
1997 1996 1995 1994 1993
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<S> <C> <C> <C> <C> <C>
Operations:
Net sales $ 135,006 $ 168,346 $175,036 $ 193,459 $ 177,610
Cost of goods sold 139,303 192,094 146,820 166,051 152,776
Interest expense, net 7,863 7,001 3,006 3,868 4,388
(Loss) income before income taxes (40,656) (56,632) 4,372 (6,794) (4,609)
Income taxes 0 (2,939) 1,552 27 (1,632)
Net (loss) income (40,656) (53,693) 2,820 (6,821) (2,977)
Financial data:
Inventories $ 31,214 $ 43,883 $ 79,968 $ 44,720 $ 63,086
Accounts receivable 17,200 25,675 29,438 35,757 28,718
Depreciation, amortization and
goodwill write-off (see note below) 6,974 5,886 4,649 11,443 4,266
Working capital (42,595) (13,582) 72,904 60,885 84,361
Long-term debt and
capital lease obligations 2,032 3,125 37,404 17,133 47,228
Shareholders' equity (deficiency) (8,742) 37,743 77,840 76,022 82,822
Total assets 86,977 129,525 165,017 120,917 149,266
Common Stock data:
Net (loss) income per share $ (4.44) $ (7.58) $ .40 $ (.98) $ (.43)
Book value per share $ (0.96) $ 3.49 $ 11.32 $ 10.92 $ 11.09
Number of common
shares outstanding 9,149 9,149 6,879 6,961 6,957
</TABLE>
Net loss for fiscal 1997, 1996, 1995 and 1994 includes after-tax amounts of
$15,282, $6,229, $2,519 and $4,700, respectively, for restructuring charges as
described in Note 5 to the Company's financial statements for the fiscal year
ended September 27, 1997. Net loss for fiscal 1994 also includes a $6,651
write-off of goodwill. See Note 1 to the Company's financial statements for the
fiscal year ended September 27, 1997.
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ITEM SEVEN - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
(In thousands, except share and per share amounts)
RESULTS OF OPERATIONS
1997 Compared 1996
Net sales of the Company for the year ended September 27, 1997 were
$135,000 as compared to $168,300 in the prior year, a decrease of $33,300 or
19.8% . $21,500 of the sales decrease was attributable to lower units sold as a
result of high inventory balances in customers' warehouses and increased
competition in the marketplace. Lower unit selling prices further reduced sales
by $11,800 and were caused by continued production overcapacity in the industry
and lower priced imports.
Gross profit for 1997 increased $19,400 from the prior year due to lower
raw material prices of $1,200 and improved manufacturing efficiencies and cost
reductions of $14,900 as well as 1996 second quarter writedowns of $10,500
offset by reduced revenues of $11,800 attributable to decreased prices and
promotional pricing resulting from the Company's efforts to reduce inventory
levels and from generally lower selling prices within the marketplace. Gross
profit, as a percentage of net sales, increased to (3.2)% compared to (14.1)% in
the prior year. Market pressures that resulted in reduced sales volumes and
prices and operating losses during the year ended September 27, 1997 are
continuing in fiscal 1998.
Selling, general and administrative expenses for 1997 decreased $6,400
or 32.8% from 1996. Selling, general and administrative expense, as a percent
of net sales, is expected to further decrease due to the staffing reductions
mentioned below.
Interest expense, net of interest income, was $7,900 compared to $7,000 for
last year. The increase was due to higher average borrowings as well as higher
interest rates.
Net loss for fiscal year 1997 was $40,656 compared to $53,693 for fiscal
year 1996. Included in the net loss for 1997 were restructuring costs totaling
$15,282 related to the consolidation discussed below. Included in the net loss
for 1996 were restructuring costs totaling $6,229 related to the shutdown of two
facilities located in South Carolina and reductions in administrative and
supervisory staffing. In 1996 and 1997 the Company reduced its administrative
and supervisory staff by approximately 340 persons which reduced costs by
approximately $12,000.
In September 1997, the Company announced a plan to consolidate certain of
its operations in order to lower its costs and make its operations more
efficient. The consolidation will involve the closing of one facility, the write
down to estimated fair value of certain excess production equipment and the
shift of more assembly operations to existing offshore facilities. The
consolidation is expected to reduce annual operating costs by $17,000.
1996 Compared to 1995
Net sales of the Company were $168,300 as compared to $175,000 in the prior
year, a decrease of $6,700 or 3.8% due primarily to reduced selling prices of
$19,500 attributable to decreased prices of T-shirts and fleece and promotional
pricing; offset by an increase in unit sales of $14,594.
Gross profit for 1996 decreased $52,000 from the prior year due to charges
of approximately $11,300 to write down certain inventories to their net
realizable value, as well as reduced revenues of $26,000 attributable to
decreased prices and promotional pricing resulting from the Company's efforts to
reduce inventory levels, and generally lower selling prices within the
marketplace. Additionally, unfavorable absorption of fixed costs aggregating
approximately $14,600 was incurred due to lower units produced. Gross profit, as
a percentage of net sales, decreased to (14.1%) compared to 16.1% in the prior
year.
Selling, general and administrative expenses for 1996 decreased $1,200 or
5.7% from 1995. Selling, general and administrative expense, as a percent of net
sales, is expected to decrease in future periods due to the staffing reductions
mentioned below.
Interest expense, net of interest income, was $7,000 compared to $3,000 for
last year. The increase was due to higher average borrowings as well as higher
interest rates.
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Net loss for fiscal year 1996 was $53,700 compared to a net income of
$2,800 for fiscal year 1995. Included in the net loss for 1996 were
restructuring costs totaling $6,229 related to the shutdown of two facilities
located in South Carolina and reductions in administrative and supervisory
staffing. In 1996 the Company reduced its administrative and supervisory staff
by approximately 150 persons.
LIQUIDITY AND CAPITAL RESOURCES
The Company working capital deficit $42,595 at September 27, 1997
compared to a deficit of $13,582 at September 28, 1996. This change was caused
primarily by reductions in cash, accounts receivable and inventories.
The Company had a net decrease in cash of $7,481 in fiscal 1997
compared to a net increase in cash of $6,386 in fiscal 1996. Net cash used in
operating activities for 1997 and 1996 were $2,200 and $5,700, respectively.
The primary component of cash used in operating activities in fiscal 1997 was
the net loss as adjusted for depreciation and amortization. In fiscal 1997
working capital funds were provided from a net decrease in inventory of $12,700
and a decrease in receivables of $9,700. Inventories at September 28, 1996 of
$43,900 were reduced by 28.9% in 1997 to $31,200. The Company believes that
inventories will be maintained at lower levels than in prior years. The primary
component of cash used in operating activities in fiscal 1996 was the net loss
as adjusted for depreciation and amortization. In fiscal 1996 working capital
funds were provided from a net decrease in inventory of $36,100 and a decrease
in accounts receivable of $3,900. Inventories at September 30, 1995 of $80,000
were reduced by 45% in 1996 to $43,900.
Cash used in investing activities in fiscal 1997 consisted mostly of
capital expenditures of $2,832, primarily to complete expansion of Company's
textile manufacturing plant in Fayette, Alabama.
In January 1996, the Company issued 10% subordinated notes to Avondale
Mills, Inc. and Robert M. Gintel, Oneita's then Chairman of the Board, in the
aggregate principal amount of $15,000 maturing February 26, 1999, concurrently
with the funding of the Company's new bank credit facility. In August 1996, the
Avondale Note of $7,500, along with accrued interest thereon, was converted into
2,270,833 shares of Common Stock of the Company at a rate of $3.50 principal
amount plus interest of notes per share of Common Stock in a transaction exempt
from the registration requirements of the Securities Act of 1933, as amended,
pursuant to Section 4(2) thereof. The remaining notes payable to Mr. Gintel are
subordinated 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.
In January 1996, the Company entered into a new $60,000 revolving credit
agreement with its banks. At September 27, 1997, $57,000 in principal was
outstanding under this agreement. The proceeds of the new debt were used to pay
off an existing bank credit facility and existing short-term bank lines totaling
$50,000. The additional proceeds were used for working capital and capital
expenditures. The new revolving line of credit is collateralized by inventories
and account receivables and has a maturity date of January 26, 1999.
At September 27, 1997, the Company was and continues to be in
non-compliance with certain terms of its long-term revolving credit agreement, a
loan agreement with an institutional lender, and subordinated notes held by Mr.
Gintel. These obligations, $57,000, $6,154 and $7,500 in principal amount,
respectively, are subject to acceleration by the lenders (and in May 1997 the
institutional lender declared all of the indebtedness due to it to be
immediately due and payable) and accordingly have been classified as current
liabilities.
The Company has negotiated an agreement in principle to restructure these
obligations which aggregate $70,654, plus accrued interest and fees, pursuant to
which such obligations will be exchanged for; 1) payment of $15,000 in cash, 2)
the issuance of various notes totaling $38,500 and 3) 79.75% of the outstanding
Common Stock of the Company. The Company is attempting to complete the
agreements which will be implemented through a pre-negotiated Chapter 11 case.
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The Company has reached an agreement in principle with a lender for debtor in
possession financing and for financing when it emerges from bankruptcy. However,
due to the complexity of the transaction and competing interests, there can be
no assurance that the Company will be able to finalize all of the necessary
agreements with respect to the restructuring or that, if the Chapter 11 case is
commenced, it will be able to implement the Pre-negotiated Plan.
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 the proposed financing upon emerging from bankruptcy; however, no
assurance can be given that such financing will be available or sufficient.
Accordingly, the Company has received a going concern opinion from its
independent public accountants, see "Report of Independent Public Accountants".
All statements other than statements of historical fact included in this
report regarding the Company's financial position, business strategy and the
plans and objectives of the Company's management for the future operations, are
forward-looking statements. When used herein, words such as "anticipate,"
"believe," "estimate," "expect," "intend" and similar expressions, as they
relate to the Company or its management, identify forward-looking statements.
Such forward-looking statements are based on the beliefs of the Company's
management, as well as assumptions made by and information currently available
to the Company's management. Actual results could differ materially from those
contemplated by the forward-looking statements as a result of certain factors,
including but not limited to, competitive factors and pricing pressures, changes
in legal and regulatory requirements, technological change or difficulties,
product development risks, commercialization and trade difficulties and general
economic conditions. Such statements reflect the current views of the Company
with respect to future events and are subject to these and other risks,
uncertainties and assumptions relating to the operations, results of operations,
growth strategy and liquidity of the Company. All subsequent written and oral
forward-looking statements attributable to the Company or persons acting on its
behalf are expressly qualified in their entirety by this paragraph.
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.
ITEM EIGHT - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements and supplementary data listed in the accompanying
Index to Financial Statements and Schedules are attached as part of this report.
ITEM NINE - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
10
<PAGE> 11
PART III
ITEM TEN - DIRECTORS AND EXECUTIVE OFFICERS OF THE DIRECTORS OF THE COMPANY
REGISTRANT
The Company's Certificate of Incorporation presently provides for a Board
of Directors consisting of not less than three nor more than nine directors, who
serve until the next Annual Meeting of Stockholders or until their successors
have been chosen and qualify. The Company's Board of Directors now consists of
seven directors as set forth below.
<TABLE>
<S> <C> <C>
Jack R. Altherr, Jr. (2) (3) (4) Meyer A. Gross (1) (3) H. Varnell Moore (1) (4)
C. Michael Billingsley (4) John G. Hudson (1) (4) Lewis Rubin (2) (3)
G. Stephen Felker (1)
</TABLE>
(1) Member of Compensation Committee.
(2) Member of Nominating Committee.
(3) Member of Audit Committee.
(4) Member of Executive Committee.
PRINCIPAL OCCUPATION OF DIRECTORS
MR. JACK R. ALTHERR, JR. (48), a director of the Company since February
1996, has been Vice Chairman of Avondale Incorporated and of Avondale Mills,
Inc. since May 1996, and Chief Financial Officer since October 1988 and Director
since 1993 of Avondale Mills, Inc. In addition, Mr. Altherr served in various
administrative and financial positions with Avondale Mills, Inc. from July 1982
to October 1988. See "Certain Transactions".
MR. C. MICHAEL BILLINGSLEY (46), a director of the Company since March
1996, has been President and Chief Executive Officer of the Company since March
1996. Prior to joining the Company, from July 1990 to March 1996, Mr.
Billingsley was Corporate Vice President of Avondale Mills, Inc. and President
of Avondale Yarns. See "Certain Transactions".
MR. G. STEPHEN FELKER (46), a director of the Company since August 1996,
has been Chairman of the Board and Chief Executive Officer since 1986 and
President since 1995 of Avondale Mills, Inc., and President and Chief Executive
Officer since 1980 and Chairman of the Board since 1992 of Avondale
Incorporated. Mr. Felker is also a director of Wachovia Bank of Georgia. See
"Certain Transactions".
MR. MEYER A. GROSS (61), a director of the Company since June 1988, has
been a practicing attorney in the State of New York since 1961 and, since 1985
has been a partner in the law firm of Schweitzer Cornman Gross & Bondell LLP and
its predecessor firms, intellectual property counsel to the Company.
MR. JOHN G. HUDSON (72), a director of the Company since December 1990. Mr.
Hudson is also a director of West Point Stevens, Inc.
MR. H. VARNELL MOORE (61), a director of the Company since November 1994,
was President, Chief Executive Officer and a director of Woolrich, Inc., a
manufacturer of outdoor wear, from July 1993 through May 1996. For more than
three years prior thereto, he was President of VF Corporation, a manufacturer of
sportswear and other apparel.
MR. LEWIS RUBIN (60), a director of the Company since October 1993, has
been President, Chief Executive Officer and a director of XTRA Corporation, a
transportation equipment leasing company, since April 1990.
11
<PAGE> 12
OFFICERS OF THE COMPANY
The executive officers of the Company are as follows:
<TABLE>
<CAPTION>
NAME OFFICE HELD
---- -----------
<S> <C>
C. Michael Billingsley ................. President and Chief Executive Officer
William H. Boyd ........................ Vice President-Administration and Treasurer
Edward I. Kramer ....................... Secretary
</TABLE>
MR. WILLIAM H. BOYD (50), Vice President-Administration since January 1986
and Treasurer since September 1994, has been employed by the Company in various
accounting and financial positions since August 1982.
MR. EDWARD L. KRAMER (63), has been a practicing attorney in the State of
New York since 1960, and is a member of the law firm of Blau, Kramer, Wactlar &
Lieberman, P.C., counsel to the Company. Mr. Kramer was appointed Secretary in
August 1988. See "Certain Transactions".
ITEM ELEVEN - EXECUTIVE COMPENSATION
(In thousands, except share and per share amounts)
The following table sets forth the annual and long-term compensation with
respect to the Chief Executive Officer, one other executive officer, and two
former executive officers whose total annual salary and bonus equaled or
exceeded $100 for services rendered for the fiscal years ended September 27,
1997, September 28, 1996 and September 30, 1995.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
ANNUAL COMPENSATION (1) ----------------------------
-------------------------------- STOCK
FISCAL OPTION ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS AWARDS # COMPENSATION (2)
- --------------------------- ---- ------ ----- -------- ----------------
<S> <C> <C> <C> <C> <C>
C. Michael Billingsley ......... 1997 $300 $ 50 120,000 $ 1.2
Chief Executive Officer 1996 156 50 -- .6
1995 -- -- -- --
William H. Boyd ................ 1997 $108 -- 5,000 $ 1.4
Vice President, Treasurer 1996 108 -- -- 1.5
1995 107 -- 2,000 1.5
</TABLE>
(1) No Other Annual Compensation is shown because the amounts of perquisites
and other non-cash benefits provided by the Company do not exceed the
lesser of $50.0 or 10% of the total annual base salary and bonus
disclosed in this table for the respective officer.
(2) All Other Compensation includes (a) for fiscal 1997, $1.2 and $0.8 of
premiums paid by the Company in respect of term life insurance policies on
each of Messrs. Billingsley and Boyd, and $0.6 contributed by the Company
to Mr. Boyd's account pursuant to the Company's 401(k) Savings Plan, (b)
for fiscal 1996, $0.6 and $0.8 of premiums paid by the Company in respect
of term life insurance policies on each of Messrs. Billingsley and Boyd,
and $0.7 contributed by the Company to Mr. Boyd's account pursuant to the
Company's 401(k) Savings Plan, and (c) for fiscal 1995, $0.8 of premium
paid by the Company in respect of term life insurance policy on Mr. Boyd
and $0.7 contributed by the Company to Mr. Boyd's account pursuant to the
Company's 401(k) Savings Plan.
12
<PAGE> 13
STOCK OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth all stock option grants to the executive
officers named in the "Summary Compensation Table" during the year ended
September 27, 1997:
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
--------------------------------------------------------
% OF TOTAL
NUMBER OF OPTIONS
SHARES GRANTED TO
UNDERLYING EMPLOYEES
OPTIONS IN FISCAL EXERCISE EXPIRATION
NAME GRANTED YEAR PRICE ($/SH) DATE
------------- ---------- ---------- ------------ ----------
<S> <C> <C> <C> <C>
C. Michael Billingsley ........ 120,000 70.6% $1.75-$3.75 2/27/02
William H. Boyd ............... 5,000 2.9% $1.75 2/27/02
</TABLE>
(1) All grants are under the Company's stock option plans.
(2) Grants were made in fiscal 1997 at the market value of the Company's Common
Stock on the date of grant. Grants vest for Mr. Billingsley at 16,667 at
date of grant, 51,667 after one year and 51,666 after two years. All other
grants vest 50% one year after date of grant and the remaining balance two
years after date of grant.
(3) Total options granted to employees in fiscal 1997 were 170,000 shares of
Common Stock.
(4) Assuming annual rates of stock appreciation from September 27, 1997 (stock
price at $0.6875 per share) over the five year option period at a 10% rate,
the potential realized value is less than the exercise prices and
accordingly there is no dollar gain.
AGGREGATE OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION/SAR VALUES
No stock options were exercised during fiscal 1997. The following table
sets forth all unexercised stock option grants to the executive officers named
in the "Summary Compensation Table" as of September 27, 1997.
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
IN-THE-MONEY
NUMBER OF UNEXERCISED OPTIONS AT
SHARES OPTIONS AT FISCAL YEAR-END FISCAL YEAR-END (2)
ACQUIRED ON VALUE --------------------------- --------------------------
NAME EXERCISE REALIZED(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
C. Michael Billingsley ..... -- -- 16,667 103,333 -- --
William H. Boyd ........... -- -- 6,050 5,000 -- --
</TABLE>
(1) Values are calculated by subtracting the exercise price from the fair
market value of the Common Stock as of the exercise date.
(2) Based upon the closing price of the Company's Common Stock of $0.6875 on
September 27, 1997.
EXECUTIVE MANAGEMENT INCENTIVE PROGRAM
The Company has an executive management incentive program which is intended
to provide financial incentives to senior management and other key employees, as
defined, of the Company upon meeting certain predetermined objectives. These
objectives include the Company attaining certain levels of earnings and eligible
employees achieving individual performance goals as determined by the Board of
Directors. The Board of Directors, in its sole discretion, shall determine those
employees eligible for the executive management incentive program at the
beginning of each year.
For the year ended September 27, 1997, approximately 20 employees were
eligible to participate in the executive management incentive program. No
amounts have been or will be paid under the executive management incentive
program for the fiscal year ended September 27, 1997.
13
<PAGE> 14
401(k) SAVINGS PLAN
The Company sponsors a retirement plan (the 401(k) Savings Plan) intended
to be qualified under section 401(k) of the Internal Revenue Code of 1986, as
amended. All employees over age 21 who have completed at least 1,000 hours in
their first year of employment by the Company are eligible to participate in the
401(k) Savings Plan. Employees may contribute to the 401(k) Savings Plan on a
tax deferred basis up to 15% of their total annual salary, but in no event more
than the maximum permitted by the Code ($9.5 in calendar 1997). The Company
matches all employee contributions up to $0.5 per year per employee, and all
Company contributions are fully vested. As of September 27, 1997, approximately
1,300 employees had elected to participate in the 401(k) Savings Plan. For the
fiscal year ended September 27, 1997, the Company contribution is approximately
$350.0 to the 401(k) Savings Plan, of which $0.5 was a contribution for Mr.
Boyd.
Effective May 1, 1993, the Company's profit sharing plan was merged with
and into the 401(k) Savings Plan, and now operates as part of the 401(k) Savings
Plan. For each plan year, the Company contributes to the profit sharing
component of the 401(k) Savings Plan an amount equal to the lesser of (a) $450.0
(b) the greater of (i) 3.765% of its net income, as defined, for the fiscal year
ending during such plan year, or (ii) $120.0 (c) 15% of that year's
participants' earnings plus any available carryover from prior years or (d) the
maximum amount permitted by law based on available or accrued profits. Employees
may also contribute one to ten percent (in whole multiples) of their earnings to
the profit sharing component of the 401(k)Savings Plan, up to a maximum of (i)
25% of compensation for the plan year, or (ii) $30.0. All Company contributions
are fully vested and are allocated to employees' accounts proportionally based
on their respective earnings, up to a maximum of $20.0 per year per participant.
STOCK PLANS
Stock Option Plan
Under the Company's Stock Option Plan (the "Plan"), key employees,
directors and officers may be granted options to purchase an aggregate of
514,652 shares of the Company's Common Stock. The term "key employees" includes
employees whose judgment, initiative and efforts are deemed valuable for the
successful conduct and development of the Company's business. The Plan is
administered by the Compensation Committee (the "Committee"), consisting of at
least three members of the Board of Directors. The Committee, subject to
provisions in the Plan, will designate, in its discretion, which persons are to
be granted options, the number of shares subject to each option, the number of
options to be granted and the period of each option. Each recipient must be an
employee of the Company at the time of grant and throughout the period ending on
the day three months before the date of exercise. Under the terms of the Plan,
the exercise price of the shares subject to each option granted will be not less
than 100% of the fair market value at the date of grant, or 110% of such fair
market value for options granted to any employee or director who own stock
possessing more than ten percent (10%) of the total combined voting power of all
classes of stock of the Company. Adjustments will be made to the purchase price
in the event of stock dividends, corporate reorganizations, or similar events.
During fiscal 1997, 85,000 options were granted under the Plan. As of September
27, 1997, options to purchase 53,413 shares were exercisable and options to
purchase 215,881 shares have been exercised.
Non-Qualified Stock Option Plan
In February 1990, the Company's stockholders approved a Non-Qualified Stock
Option Plan (the "Non-Qualified Plan") which covers 453,876 shares of the
Company's Common Stock. The options become exercisable in installments as
determined at the time of grant by the Board of Directors. During fiscal 1997,
85,000 options were granted under the Non-Qualified Plan. As of September 27,
1997, options to purchase 115,554 shares were exercisable, and 57,040 options
have been exercised.
14
<PAGE> 15
Outside Director Stock Option Plan
In February 1995, the Company's stockholders approved an Outside Director
Stock Option Plan (the "Director Plan") which covers 60,000 shares of the
Company's Common Stock and became effective November 15, 1994. All directors of
the Company who are not employees of the Company, of which there are presently
six (6), are eligible to participate in the Director Plan. The Director Plan is
administered by the Board of Directors. Under the Director Plan, each
non-employee director annually is granted options to purchase 2,000 shares of
Common Stock at a price equal to the fair market value on the date of grant.
During fiscal 1997, the Company granted options to purchase 12,000 shares of
Common Stock at an exercise price of $1.75.
Employee Stock Purchase Plan
In February 1996, the Company's stockholders approved an Employee Stock
Purchase Plan (the "Stock Purchase Plan") which makes available 250,000 shares
of the Company's Common Stock for purchase by eligible employees of the Company
and certain of its subsidiaries. An eligible employee may elect to participate
in the Stock Purchase Plan by authorizing limited payroll deductions to be
applied to the purchase of Common Stock. As of September 27, 1997, the Stock
Purchase Plan had not yet been implemented.
ITEM TWELVE - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following table sets forth as of the Record Date certain information
with regard to ownership of the Company's Common Stock by, (i) each beneficial
owner of 5% of more of the Company's Common Stock, based on reports filed with
the Securities and Exchange Commission; (ii) each director and each executive
officer named in the "Summary Compensation Table"; and (iii) all executive
officers and directors of the Company as a group:
<TABLE>
<CAPTION>
SHARES OF
NAME AND ADDRESS COMMON STOCK PERCENT OF
OF BENEFICIAL OWNER BENEFICIALLY OWNED CLASS (1)
------------------- ------------------ ---------
<S> <C> <C>
Avondale Mills, Inc. (2).............................. 2,270,833 24.0%
Robert M. Gintel (3).................................. 725,000 (4) 7.7%
Meyer A. Gross........................................ 13,350 (5) -
John G. Hudson........................................ 32,500 (6) -
H. Varnell Moore...................................... 7,500 (6) -
Lewis Rubin........................................... 25,500 (6) -
C. Michael Billingsley................................ 21,917 (7) -
Jack R. Altherr, Jr................................... 2,000 (8)(9) -
G. Stephen Felker..................................... 18,500 (9) -
William H. Boyd....................................... 10,208 (10) -
Directors and officers as a group (9 persons)......... 133,475 (11) 1.4%
</TABLE>
(1) Unless otherwise indicated, (a) no director beneficially owns more than 1%
of the Company's Common Stock; and (b) ownership represents sole voting and
investment power.
(2) The address for Avondale Mills, Inc. is P.O. Box 1109, Monroe, Georgia
30655.
(3) Mr. Gintel resigned as a director and as Chairman of the Board of the
Company on August 8, 1997.
(4) Includes 125,000 shares issuable upon the exercise of certain warrants by
Mr. Gintel.
(5) Includes options exercisable within sixty (60) days of September 27, 1997
for 8,250 shares under the Company's Non-Qualified Stock Option Plan and
4,000 shares under the Company's Outside Director Stock Option Plan.
15
<PAGE> 16
(6) Includes options exercisable within sixty (60) days of September 27, 1997
for 7,500 shares under the Company's Outside Director Stock Option Plan.
(7) Includes options exercisable within sixty (60) days of September 27, 1997
for 16,667 shares under the Company's Non-Qualified Stock Option Plan.
(8) Represents options exercisable within sixty (60) days of September 27, 1997
for 2,000 shares of the Company's Common Stock under the Company's Outside
Director Stock Option Plan.
(9) Does not include 2,270,833 shares of Common Stock owned of record by
Avondale Mills, Inc. of which Messrs. Altherr and Felker are executive
officers and directors and thus may share certain voting, investment and
dispositive powers.
(10) Includes options exercisable within sixty (60) days of September 27, 1997
for 2,500 shares of the Company's Common Stock under the Company's Stock
Option Plan and 3,550 shares under the Company's Non-Qualified Stock Option
Plan.
(11) Includes options exercisable within sixty (60) days of September 27, 1997
for an aggregate of 2,500 shares of the Company's Common Stock under the
Company's Stock Option Plan, 30,567 shares under the Company's
Non-Qualified Stock Option Plan, and 28,500 shares under the Company's
Outside Director Stock Option Plan.
ITEM THIRTEEN - CERTAIN TRANSACTIONS
(Dollars in thousands)
In January 1996, the Company issued 10% subordinated notes to Avondale
Mills, Inc. and Robert M. Gintel in the aggregate principal amount of $15,000.0
maturing February 26, 1999, concurrently with the funding of the Company's new
bank credit facility. In August 1996, the note issued to Avondale Mills, Inc.,
in the principal amount of $7,500.0, along with accrued interest thereon, was
converted into 2,270,833 shares of Common Stock of the Company at a rate of
$3.50 principal amount of notes per share of Common Stock in a transaction
exempt from the registration requirements of the Securities Act of 1933, as
amended, pursuant to Section 4(2) thereof. The remaining notes payable to Mr.
Gintel are subordinated 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. During fiscal 1996, the Company
determined not to proceed with a proposed rights offering of Common Stock which
had been intended to repay the subordinated notes issued to Avondale Mills Inc.
and 50% of the subordinated notes payable to Mr. Gintel. In addition, in
connection with the issuance of one of the notes to Robert M. Gintel, the
Company issued to Robert M. Gintel a warrant to purchase up to 125,000 shares of
Common Stock at $7.00 per share. The issuance of such warrant was approved by
stockholders of the Company in February 1996. See "Security Ownership".
During fiscal 1997, the Company made purchases totaling approximately
$31,000.0 of yarn and other raw materials from Avondale Mills, Inc. Messrs.
Altherr, Jr. and Felker are directors of the Company and are directors and
executive officers of Avondale Mills, Inc. C. Michael Billingsley, the Company's
President and Chief Executive Officer, is a former executive officer of Avondale
Mills, Inc. John G. Hudson, a director of the Company, is a former President and
Chief Operating Officer of Avondale Mills, Inc. See "Security Ownership",
"Principal Occupations of Directors".
16
<PAGE> 17
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee of the Company's Board of Directors consisted
during fiscal 1997 of Messrs. Hudson (Chairman), Gintel, Gross, and Moore. Mr.
Gintel resigned as a director and as Chairman of the Board of the Company on
August 8, 1997. In January 1996, the Company issued 10% subordinated notes to
Robert M. Gintel in the aggregate principal amount of $7,500.0 maturing February
26, 1999, concurrent with the funding of the Company's new bank credit facility.
The notes payable to Mr. Gintel are subordinated to the Company's bank debt and
certain other senior debt. In addition, in connection with the issuance of one
of the notes to Robert M. Gintel, the Company issued to Robert M. Gintel a
warrant to purchase up to 125,000 shares of Common Stock at $7.00 per share. The
issuance of such warrant was approved by stockholders of the Company in February
1996. The proceeds from issuance of the subordinated notes have been used for
working capital and capital expenditures. During fiscal 1996, the Company
determined not to proceed with a proposed rights offering of Common Stock which
had been intended to repay 50% of the subordinated notes payable to Mr. Gintel.
In accordance with rules promulgated by the Securities and Exchange
Commission, the information included under the captions "Compensation
Committee Report on Executive Compensation" and "Company Stock Performance"
will not be deemed to be filed or to be proxy soliciting material or
incorporated by reference in any prior or future filings by the Company
under the Securities Act of 1933 or the Securities Exchange Act of 1934.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The compensation of the Company's executive officers is generally
determined by the Compensation Committee of the Board of Directors. Except as
otherwise disclosed herein each member of the Compensation Committee is a
director who is not an employee of the Company or any of its affiliates.
GENERAL POLICIES
The Company's compensation programs are intended to enable the Company to
attract, motivate, reward and retain the management talent required to achieve
aggressive corporate objectives in a rapidly changing industry, and thereby
increase stockholder value. It is the Company's policy to provide incentives to
its senior management to achieve both short-term and long-term objectives and to
reward exceptional performance and contributions to the development of the
Company's business. To attain these objectives, the Company's executive
compensation program includes a competitive base salary, coupled with a
substantial cash incentive component under its executive management incentive
program which is "at risk" based on the performance of the Company's business,
primarily as reflected in the achievement of financial goals. As a general
matter, as an executive officer's level of management responsibility in the
Company increases a greater portion of his or her potential total compensation
depends upon the Company's performance as measured by objective standards over
one or more years.
Stock options are granted to employees, including the Company's executive
officers, by the Compensation Committee under the Company's Stock Option Plan
and Non-Qualified Stock Option Plan. The Committee believes that stock options
provide an incentive that focuses the executive's attention on managing the
Company from the perspective of an owner with an equity stake in the business.
Generally, options are awarded with an exercise price equal to the market value
of Common Stock on the date of grant, have a maximum term of five to ten years
and become exercisable for half of the option shares one year from the date of
grant and for all of the option shares two years from the date of grant. Among
the Company's executive officers, the number of shares subject to options
granted to each individual depends upon the level of that officer's
responsibility. The largest grants are awarded to the officers who, in the view
of the Compensation Committee, have the greatest potential impact on the
Company's profitability and growth. Previous grants of stock options are
reviewed but are not considered the most important factor in determining the
size of any executive's stock option award in a particular year.
17
<PAGE> 18
From time to time, the Compensation Committee utilizes the services of
independent consultants to perform analyses and to make recommendations to the
Committee relative to executive compensation matters. No compensation consultant
is paid on a retainer basis and none such services were utilized during fiscal
1997.
RELATIONSHIP OF COMPENSATION TO PERFORMANCE
The Compensation Committee annually establishes, subject to the approval of
the Board of Directors and any applicable employment agreements, the salaries
which will be paid to the Company's executive officers during the coming year.
In setting salaries, the Compensation Committee takes into account several
factors, including the Company's existing salary structure, the extent to which
an individual has participated in the incentive compensation and stock option
plans maintained by the Company and its affiliates, and qualitative factors
bearing on an individual's experience, responsibilities, management and
leadership abilities, and job performance.
The Compensation Committee also determines the terms of the Company's
executive management incentive program. In doing so, the Compensation Committee
reviews management's plans for the Company's growth and profitability,
determines the criteria to be used for the determination of bonus awards under
the executive management incentive program and fixes the levels of target and
maximum awards for participants and the level of attainment of financial
performance objectives necessary for awards to be made under each incentive
compensation plan.
For fiscal 1997, no bonuses were paid or will be paid pursuant to the
Company's executive management incentive program because none of the financial
targets thereunder were achieved. Under that plan, target awards for such
officers ranging from 20% to 50% of the participant's salary at year end were
payable depending upon the level of the Company's operating income (or in the
case of certain officers who had management responsibility for one of the
Company's operating groups, depending in part on the performance of such
individual and his operating group). Under the terms of this plan, no incentive
bonus was payable to an executive officer unless a specified level of the
Company's operating income or the operating group's or individual's performance
target, as the case may be, was achieved. The plan was designed in such a way as
to disproportionately increase or decrease a participant's incentive bonus in
the event that actual results exceed or fall short, respectively, of targeted
levels.
Stock options are granted to key employees, including the Company's
executive officers, by the Compensation Committee under the Plan and the
Non-Qualified Plan. Among the Company's executive officers, the number of shares
subject to options granted to each individual generally depends upon his or her
base salary and the level of that officer's management responsibility. The
largest grants are awarded to the officers who, in the view of the Compensation
Committee, have the greatest potential impact on the Company's profitability and
growth. For fiscal 1997, 170,000 stock options were granted pursuant to the Plan
and the Non-Qualified Plan.
COMPENSATION OF PRESIDENT AND CHIEF EXECUTIVE OFFICER
For fiscal 1997, Mr. C. Michael Billingsley, the Company's President and
Chief Executive Officer, received a base salary at the annual rate of $300.0.
Such compensation was approved by the Compensation Committee, taking into
account, among other things, the existing compensation structure for the prior
chief executive officer of the Company.
The Compensation Committee
John G. Hudson, Chairman
Meyer A. Gross
H. Varnell Moore
18
<PAGE> 19
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's executive
officers, directors and persons who own more than ten percent of a registered
class of the Company's equity securities ("Reporting Persons") to file reports
of ownership and changes in ownership on Forms 3, 4 and 5 with the Securities
and Exchange Commission (the "SEC") and the New York Stock Exchange (the
"NYSE"). These Reporting Persons are required by SEC regulation to furnish the
Company with copies of all Forms 3, 4 and 5 they file with the SEC and the NYSE.
Based solely upon the Company's review of the copies of the forms it has
received, the Company believes that all Reporting Persons complied on a timely
basis with all filing requirements applicable to them with respect to
transactions during fiscal 1997.
COMPANY STOCK PERFORMANCE
The following graph sets forth the cumulative total stockholder return to
the Company's stockholders during the five year period ended September 27, 1997,
as well as an overall stock market index (S&P 500 Index) and the Company's peer
group index (S&P Textiles (Apparel)):
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN*
AMONG ONEITA INDUSTRIES, INC., THE S&P 500 INDEX
AND THE S&P TEXTILES (APPAREL) INDEX
<TABLE>
<CAPTION>
DATE ONEITA INDUSTRIES, INC. S&P 500 S&P TEXTILES
(APPAREL)
<S> <C> <C> <C>
9/92 $100 $100 $100
9/93 48 113 77
9/94 81 117 85
9/95 63 152 82
9/96 29 183 112
9/97 5 257 121
</TABLE>
-----------
*$100 invested on September 30, 1992 in Stock or Index--Including
reinvestment of dividends. Fiscal year ending September 30.
19
<PAGE> 20
PART IV
ITEM FOURTEEN - EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 10-K
(a) Financial Statements:
See Index to Consolidated Financial Statements and Schedules at page
F-1.
(b) Reports on Form 8-K:
No reports on Form 8-K were filed by Registrant in the last quarter of
the year covered by this report.
(c) Exhibits:
3.1 Certificate of Incorporation (incorporated by reference to
Exhibit 3(a) of Form S-1 Registration Statement No. 33-16972)
3.2 By-laws as amended (incorporated by reference to Exhibit 3.1 of
Form 10-Q for the quarter ended March 31, 1994)
10.1 Stock Option Plan (incorporated by reference to Exhibit 10(a) of
Form S-1 Registration Statement No. 33-16972)
10.2 1989 Non-Qualified Stock Option Plan (incorporated by reference
to Exhibit 10.2 of Annual Report on Form 10-K for the year ended
September 30, 1990)
10.3 $60,000 Revolving Credit Agreement dated January 26, 1996 among
the Company, SunTrust Bank, Atlanta, First Union National Bank
of South Carolina and NatWest Bank N.A. (incorporated by
reference to Exhibit 10.28 of Form 10-Q for the quarter ended
December 31, 1995)
10.4 10% Subordinated Notes dated January 26, 1996 in the principal
amount of $7,500 issued to Robert M. Gintel (incorporated by
reference to Exhibit 10.25 of Form 10-Q for the quarter ended
December 31, 1995)
10.5 Note Agreement dated as of December 20, 1988, between Registrant
and an institutional lender, as amended. (Incorporated by
reference to Exhibit 10.10 of Annual Report on Form 10-K for the
year ended September 30, 1988 and Exhibit 10.26 to Annual Report
on Form 10-K for the year ended September 30, 1995)
10.6 Letter of Credit Agreement dated as of October 1, 1989, between
the Registrant and Trust Company Bank (incorporated by reference
to Exhibit 10.12 of Annual Report on Form 10-K for the year
ended September 30, 1989)
10.7 Lease Agreement dated as of October 1, 1989, between the
Registrant and the Industrial Development Board of the City of
Fayette, Alabama (incorporated by reference to Exhibit 10.13 of
the Annual Report on Form 10-K for the year ended September 30,
1989)
10.8 Guaranty Agreement dated as of October 1, 1989, between the
Registrant and Trust Company Bank (incorporated by reference to
Exhibit 10.14 of Annual Report on Form 10-K for the year ended
September 30, 1989)
10.9 Form of Indemnification Agreement between Registrant and its
officers and directors (incorporated by reference to Exhibit 28
to Current Report on Form 8-K dated July 30, 1991)
10.10 Modification to Management Services Contract dated February 5,
1993 (incorporated by reference to Exhibit 28 to Current Report
on Form 8-K dated January 1, 1993)
10.11 Registration Rights Letter Agreement between the Registrant and
Gintel & Co. Limited Partnership (incorporated by reference to
Exhibit 10 to Current Report on Form 8-K dated October 6, 1993)
10.12 Letter Agreement dated October 5, 1993, between Gintel & Co.
Limited Partnership and Instrument Systems Corporation
(incorporated by reference to Exhibit 2 to Current Report on
Form 8-K dated October 6, 1993)
10.13 Note Purchase Agreement dated as of December 28, 1995 among
Registrant, Robert M. Gintel and Avondale Mills, Inc.
(incorporated by reference to Exhibit 10.24 of Annual Report on
Form 10-K for the year ended September 30, 1995)
10.14 Agreement dated August 15, 1996 (related to note conversion)
between Registrant and Avondale Mills, Inc. (incorporated by
reference to Exhibit 10.17 of the Annual Report on Form 10-K
for the year ended September 28, 1996)
11 Computation of Earnings Per Share*
20
<PAGE> 21
22 The following lists the Company's significant subsidiaries, all
of which are wholly-owned by the Company. The names of certain
subsidiaries which do not, when considered in the aggregate,
constitute a significant subsidiary have been omitted.
<TABLE>
<CAPTION>
Name of Subsidiary Jurisdiction of Incorporation
------------------ -----------------------------
<S> <C>
Oneita - Kinston Corp. North Carolina
Oneita - Strathleven Limited Jamaica
Oneita Freeport Limited Jamaica
Oneita Mexicana S. A. de C.V. Mexico
</TABLE>
23 Consent of Arthur Andersen LLP*
27 Financial Data Schedule*
- -------------------------------------------
* Filed herewith
21
<PAGE> 22
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Company has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized on the 30th day of
December, 1997.
Oneita Industries, Inc.
By: /s/ C. Michael Billingsley
-------------------------------------
C. Michael Billingsley
President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed on December 30, 1997 by the following persons in the capacities
indicated:
Signatures Title
/s/ C. Michael Billingsley President and Chief Executive Officer
- ---------------------------------
C. Michael Billingsley
/s/ William H. Boyd Vice President and Treasurer
- --------------------------------- (Principal Accounting Officer)
William H. Boyd
/s/ Jack R. Altherr, Jr. Director
- ---------------------------------
Jack R. Altherr, Jr.
/s/ G. Stephen Felker Director
- ---------------------------------
G. Stephen Felker
/s/ Meyer A. Gross Director
- ---------------------------------
Meyer A. Gross
/s/ John G. Hudson Director
- ---------------------------------
John G. Hudson
/s/ H. Varnell Moore Director
- ---------------------------------
H. Varnell Moore
/s/ Lewis Rubin Director
- ---------------------------------
Lewis Rubin
22
<PAGE> 23
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULE
ONEITA INDUSTRIES, INC.
(Information required by Part III, Item 8 of Form 10-K)
<TABLE>
<CAPTION>
Page
----
<S> <C>
Report of Independent Public Accountants F-2
FINANCIAL STATEMENTS
Consolidated balance sheets - September 27, 1997 and September 28, 1996 F-3
Consolidated statements of operations for the three years ended September 27, 1997 F-4
Consolidated statements of cash flows for the three years ended September 27, 1997 F-5
Consolidated statements of shareholders' equity for the three years ended September 27, 1997 F-6
Notes to consolidated financial statements F-7
FINANCIAL STATEMENT SCHEDULE
Schedule II - Valuation and Qualifying Accounts F-16
</TABLE>
Other schedules are omitted as they are not applicable or not required under the
rules of Regulation S-X.
F-1
<PAGE> 24
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Oneita Industries, Inc.:
We have audited the accompanying consolidated balance sheets of Oneita
Industries, Inc. (a Delaware corporation) and subsidiaries as of September 27,
1997 and September 28, 1996, and the related consolidated statements of
operations, cash flows and shareholders' equity for each of the three years in
the period ended September 27, 1997. These financial statements and the schedule
referred to below are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements and
schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Oneita
Industries, Inc. and subsidiaries as of September 27, 1997 and September 28,
1996 and the results of their operations and their cash flows for each of the
three years in the period ended September 27, 1997, in conformity with generally
accepted accounting principles.
The accompanying financial statements have been prepared assuming that
the Company will continue as a going concern. As shown in the accompanying
consolidated financial statements, the Company has incurred significant losses
for years ended September 27, 1997 and September 28, 1996. Unaudited interim
information indicates that losses are continuing for fiscal 1998. As discussed
in Note 1 to the accompanying consolidated financial statements, at September
27, 1997, the Company was not in compliance with certain terms of its long-term
revolving credit agreement, a loan agreement with an institutional lender, and
subordinated notes. These obligations are subject to acceleration (or have been
accelerated) by the lenders and accordingly have been classified as current
liabilities. The Company has negotiated an agreement to restructure the debt
which the Company anticipates will be implemented through a prenegotiated
Chapter 11 case. The documentation related to these various agreements has not
been completed. There is no assurance that the agreements will be finalized or
that the Chapter 11 case will be implemented as planned. These matters, among
others, raise substantial doubt about the Company's ability to continue as a
going concern. Management's plans in regard to these matters are described in
Note 1. 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.
Our audits were made for the purpose of forming an opinion on the basic
consolidated financial statements taken as a whole. The schedule listed in the
index to consolidated financial statements and schedule is presented for
purposes of complying with the Securities and Exchange Commission's rules and is
not a required part of the basic financial statements. This schedule has been
subjected to the auditing procedures applied in the audits of the basic
financial statements and, in our opinion, fairly states in all material respects
the financial data required to be set forth therein in relation to the basic
financial statements taken as a whole.
ARTHUR ANDERSEN LLP
Columbia, South Carolina,
November 21, 1997.
F-2
<PAGE> 25
CONSOLIDATED BALANCE SHEETS
ONEITA INDUSTRIES, INC.
<TABLE>
<CAPTION>
September 27, September 28,
1997 1996
---------------- --------------
(In thousands, except share amounts)
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 1,654 $ 9,135
Refundable income taxes 0 1,988
Accounts receivable, less allowance for doubtful accounts
of $836 in 1997 and $1,117 in 1996 17,200 25,675
Inventories (Note 1) 31,214 43,883
Prepaid expenses and other current assets 1,024 223
--------- ---------
Total current assets 51,092 80,904
Property, plant and equipment, at cost, net of depreciation
and amortization (Note 1) 32,733 46,244
Deferred charges and other assets 3,152 2,377
--------- ---------
$ 86,977 $ 129,525
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Long-term debt in default classified as current
(Note 3) $ 70,654 $ 72,192
Current portion of capital lease obligations
(Note 3) 1,405 1,845
Accounts payable 4,117 9,016
Accrued liabilities (Note 2) 17,511 11,433
--------- ---------
Total current liabilities 93,687 94,486
Capital lease obligations (Note 3) 2,032 3,125
Commitments (Note 7)
Shareholders' Equity (Note 4):
Preferred Stock, $1.00 par value, 2,000,000 shares
authorized, none issued -- --
Common Stock, $.25 par value, 15,000,000 authorized
shares, outstanding 9,149,339 shares in 1997 and
9,269,739 in 1996 2,287 2,318
Capital in excess of par value 75,420 76,728
Accumulated deficit (86,449) (45,793)
Treasury stock, at cost, 120,400 shares in 1996 0 (1,339)
--------- ---------
(8,742) 31,914
--------- ---------
$ 86,977 $ 129,525
========= =========
</TABLE>
The accompanying Notes to Consolidated Financial Statements are an integral part
of these balance sheets.
F-3
<PAGE> 26
CONSOLIDATED STATEMENTS OF OPERATIONS
ONEITA INDUSTRIES, INC.
<TABLE>
<CAPTION>
Years Ended
---------------------------------------------------
Sept. 27, 1997 Sept. 28, 1996 Sept. 30, 1995
--------------- -------------- --------------
(In thousands, except per share amounts)
<S> <C> <C> <C>
Net sales (Note 6) $ 135,006 $ 168,346 $175,036
Cost of goods sold 139,303 192,094 146,820
--------- --------- --------
Gross profit (loss) (4,297) (23,748) 28,216
Selling, general and administrative expenses 13,214 19,654 20,838
Consolidation and restructuring charges (Note 5) 15,282 6,229 --
--------- --------- --------
(Loss) income from operations (32,793) (49,631) 7,378
Other expense:
Interest expense, net of interest income of
$395 in 1997, $424 in 1996 and $465 in 1995 7,863 7,001 3,006
--------- --------- --------
(Loss) income before income taxes (40,656) (56,632) 4,372
--------- --------- --------
(Benefit) provision for income taxes (Note 1) :
State and local 0 (270) 194
Federal 0 (2,669) 1,358
--------- --------- --------
0 (2,939) 1,552
--------- --------- --------
Net (loss) income $ (40,656) $ (53,693) $ 2,820
========= ========= ========
Net (loss) income per share (Note 1) $ (4.44) $ (7.58) $ .40
========= ========= ========
Weighted average number of shares outstanding 9,149 7,084 6,984
========= ========= ========
</TABLE>
The accompanying Notes to Consolidated Financial Statements are an
integral part of these statements.
F-4
<PAGE> 27
CONSOLIDATED STATEMENTS OF CASH FLOWS
ONEITA INDUSTRIES, INC.
<TABLE>
<CAPTION>
Years Ended
-------------------------------------------------
Sept. 27, 1997 Sept. 28, 1996 Sept. 30, 1995
-------------- -------------- --------------
(In thousands)
<S> <C> <C> <C>
Cash Flows From Operating Activities:
Net (loss) income $(40,656) $(53,693) $ 2,820
Adjustments to reconcile net (loss) income to net cash
used in operating activities:
Depreciation and amortization 6,974 5,886 4,649
Consolidation charges 8,060 2,494 808
Provision for losses on accounts receivable 792 400 150
Decrease in deferred income taxes -- (1,621) (130)
Loss on sale of property and equipment 1,395 874 94
Change in assets and liabilities:
Decrease in receivables 9,671 3,860 3,684
Decrease (increase) in inventories 12,669 36,085 (35,248)
(Increase) decrease in prepaid expenses and
other assets (2,303) 647 1,560
Increase (decrease) in accounts payable
and accrued liabilities 1,179 (593) (2,181)
-------- -------- --------
Total adjustments 38,437 48,032 (26,614)
-------- -------- --------
Net cash used in operating activities (2,219) (5,661) (23,794)
-------- -------- --------
Cash Flows From Investing Activities:
Proceeds from sale of property, plant and equipment 641 819 86
Acquisition of property, plant and equipment (2,832) (9,184) (17,998)
Decrease (increase) in equipment lease deposits -- 883 (475)
-------- -------- --------
Net cash used in investing activities (2,191) (7,482) (18,387)
-------- -------- --------
Cash Flows From Financing Activities:
Short-term borrowings -- 2,000 30,000
Payment of short-term borrowings -- -- (7,000)
Proceeds from issuance of long-term debt -- 22,219 25,000
Purchase of treasury stock -- -- (1,339)
Sale of Common Stock -- -- 337
Decrease in funds restricted for capital projects -- -- 2,342
Payment of long-term debt and capital lease obligations (3,071) (4,690) (5,377)
-------- -------- --------
Net cash (used in) provided by financing activities (3,071) 19,529 43,963
-------- -------- --------
Net (decrease) increase in cash and cash equivalents (7,481) 6,386 1,782
Cash and cash equivalents at beginning of year 9,135 2,749 967
-------- -------- --------
Cash and cash equivalents at end of year $ 1,654 $ 9,135 $ 2,749
======== ======== ========
</TABLE>
The accompanying Notes to Consolidated Financial Statements are an integral part
of these statements.
F-5
<PAGE> 28
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
ONEITA INDUSTRIES, INC.
<TABLE>
<CAPTION>
Common Stock
--------------------------------------------
Capital in Retained
Number Par Excess of (Deficit) Treasury
of Shares Value Par Value Earnings Stock
--------------------------------------------------------------------------------
(In thousands, except share amounts)
<S> <C> <C> <C> <C> <C>
Balances as of September 30, 1994 6,960,821 $ 1,740 $ 69,202 $ 5,080 $ --
Net income -- -- -- 2,820 --
Exercise of stock options 38,085 10 327 -- --
Purchase of treasury stock -- -- -- -- (1,339)
---------- ------- -------- -------- -------
Balances as of September 30, 1995 6,998,906 1,750 69,529 7,900 (1,339)
Net loss -- -- -- (53,693) --
Common Stock issued 2,270,833 568 7,199 -- --
---------- ------- -------- -------- -------
Balances as of September 28, 1996 9,269,739 2,318 76,728 (45,793) (1,339)
Net loss -- -- -- (40,656) --
Retirement of treasury stock (120,400) (31) (1,308) -- 1,339
---------- ------- -------- -------- -------
Balances as of September 27, 1997 9,149,339 $ 2,287 $ 75,420 $(86,449) $ --
========== ======= ======== ======== =======
</TABLE>
The accompanying Notes to Consolidated Financial Statements are an integral part
of these statements.
F-6
<PAGE> 29
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
ONEITA INDUSTRIES, INC.
(In thousands, except share and per share amounts)
(1) Financial restructuring developments:
The Company has incurred net losses of $40,656 and $53,693 for the years
ended September 27, 1997 and September 28, 1996. The Company is highly
leveraged, has no short-term liquidity and is unable to service its debts.
At September 27, 1997, the Company was and continues to be in
non-compliance with certain terms of its long-term revolving credit agreement, a
loan agreement with an institutional lender, and subordinated notes held by Mr.
Gintel. These obligations, $57,000, $6,154 and $7,500 in principal amount,
respectively, are subject to acceleration by the lenders (and in May 1997 the
institutional lender declared all of the indebtedness due to it to be
immediately due and payable) and accordingly have been classified as current
liabilities.
The Company has negotiated an agreement in principle to restructure these
obligations which aggregate $70,654, plus accrued interest and fees, pursuant to
which such obligations will be exchanged for; 1) payment of $15,000 in cash, 2)
the issuance of various notes totaling $38,500 and 3) 79.75% of the outstanding
Common Stock of the Company.
The Company is attempting to complete the agreements which will be
implemented through a pre-negotiated Chapter 11 case. The Company has reached an
agreement in principle with a lender for debtor in possession financing and for
financing when it emerges from bankruptcy. However, due to the complexity of the
transaction and competing interests no assurance can be given that the final
terms of the new agreement and the restructuring of the existing debt will
ultimately be available to the Company on satisfactory terms or that the
Debtor's Prenegotiated Plan will be confirmed by the United States Bankruptcy
Court.
(2) Summary of significant accounting policies:
NATURE OF BUSINESS AND LIQUIDITY -
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.
F-7
<PAGE> 30
Market pressures that resulted in reduced sales volumes and prices and
operating losses during the year ended September 27, 1997 are continuing in
fiscal 1998. Management's operating plans include continued close monitoring of
costs and concentrating the manufacturing and sales efforts on a more profitable
product mix. In September 1997, the Company announced a plan to consolidate
certain of its operations in order to further lower its costs and make its
operations more efficient. The consolidation will involve the closing of one
facility, the write down to estimated fair value of certain excess production
equipment and the shift of more assembly operations to existing offshore
facilities. Inventories at September 30, 1995 of $80,000 were reduced by 45% in
1996 to $43,900 and then by 29% in 1997 to $31,200. The Company believes that
inventories can be maintained at lower levels than in prior years.
The accompanying consolidated financial statements have been prepared on
the basis of accounting principles applicable to a going concern and contemplate
the realization of assets and the settlement of liabilities and commitments in
the normal course of business.
BASIS OF PRESENTATION -
The consolidated financial statements of the Company include the accounts
of the Company and all of its subsidiaries. All material intercompany accounts
and transactions have been eliminated. The Company's fiscal year ends on the
last Saturday in September. The 1997 and 1996 fiscal years each reflect a
52-week period. The 1995 fiscal year reflects a 12-month period.
CASH FLOWS -
The Company considers all highly liquid debt instruments with an original
maturity of three months or less to be cash equivalents. Cash payments for
interest expense were $7,842, $7,022, and $3,565, (net of approximately $500
capitalized interest for property additions), in fiscal 1997, 1996, and 1995,
respectively. Cash payments for income taxes were $5,277 and $231 in fiscal 1995
and 1994, respectively. In fiscal 1997, income tax refunds of $2,620 were
received by the Company.
In January 1996, the Company utilized its $60,000 revolving credit
arrangement to repay $50,000 of its then existing debt. In August 1996, $7,767
of subordinated debt plus accrued interest, less deferred financing costs, was
converted into Common Stock of the Company. See Note 3.
INVENTORIES -
Inventories are stated at the lower of cost or market and include material,
labor and manufacturing overhead costs. The Company uses the last-in, first-out
method for valuing its inventories. No significant change would result if the
Company valued its entire inventory using the first-in, first-out method.
Inventories are comprised of the following:
<TABLE>
<CAPTION>
Sept. 27, 1997 Sept. 28, 1996
-------------- --------------
<S> <C> <C>
Finished goods $20,095 $31,774
Work in process 9,313 9,287
Raw materials and supplies 1,806 2,822
------- -------
$31,214 $43,883
======= =======
</TABLE>
PROPERTY, PLANT AND EQUIPMENT -
Property, plant and equipment are recorded at cost. Additions and
improvements are capitalized, while maintenance and repairs are expensed when
incurred. Depreciation of property, plant and equipment is provided primarily on
a straight-line basis over the estimated useful lives of the assets and over the
term of the lease for assets in use under capital leases. Leasehold improvements
are amortized over the life of the lease or life of the improvement, whichever
is shorter.
F-8
<PAGE> 31
Property, plant and equipment consists of the following:
<TABLE>
<CAPTION>
Estimated Sept. 27, Sept. 28,
Useful Life 1997 1996
----------- -------- ---------
<S> <C> <C> <C>
Factory machinery and equipment 8-9 $ 24,255 $ 46,058
Buildings and building improvements 20-25 12,713 19,511
Other fixtures and equipment 5 3,498 7,139
Land -- 607 708
-------- --------
41,073 73,416
Less accumulated depreciation 8,340 27,172
-------- --------
$ 32,733 $ 46,244
======== ========
</TABLE>
The above amounts include property and equipment recorded under capital
leases of $15,101 at September 27, 1997 and September 28, 1996.
Fourth quarter results for 1997 and second quarter results for 1996 include
non-cash pretax charges of $8,060 and $2,000 (included in the restructuring
charges discussed in Note 5) related to asset write-downs and write-offs.
Certain assets were evaluated and the net book value of these assets was
adjusted to the estimated fair market value.
Maintenance and repairs related to the Company's property, plant and
equipment amounted to $1,960, $2,659, and $2,615 for the years ended September
27, 1997 and September 28, 1996, and 1995, respectively.
DEFERRED CHARGES AND OTHER ASSETS -
Deferred charges and other assets include goodwill at September 27, 1997
and September 28, 1996 which represent costs in excess of net assets acquired of
$388 and $403 respectively, which is net of accumulated amortization of $137 and
$121, respectively. The goodwill is being amortized on a straight-line basis
over 40 years. The net carrying amount of goodwill approximates its estimated
fair value.
INCOME TAXES -
Income tax expense is based on reported income adjusted for differences
that do not enter into the computation of taxes payable under applicable tax
laws. Deferred income taxes are provided for timing differences between book and
taxable income. The primary components of deferred taxes result from the
differences in the reporting of depreciation, inventory valuation and accruals
not currently deductible.
At September 27, 1997, net operating loss carry forwards of approximately
$79,000 are available to reduce future income taxes payable by the Company. The
carry forwards expire in fifteen years.
The following table summarizes the (benefit) provision for federal and
state taxes on income:
<TABLE>
<CAPTION>
Years Ended
---------------------------------------
Sept. 27, Sept. 28, Sept. 30,
1997 1996 1995
-------- --------- ---------
<S> <C> <C> <C>
Current:
Federal $ -- $(1,988) $ 1,490
State -- (270) 194
------- ------- -------
-- (2,258) 1,684
Deferred:
Federal -- (681) (132)
State -- -- --
------- ------- -------
-- (681) (132)
------- ------- -------
Net tax (benefit) provision $ -- $(2,939) $ 1,552
======= ======= =======
</TABLE>
F-9
<PAGE> 32
The effective income tax rate differs from the United States federal
statutory rate as follows:
<TABLE>
<CAPTION>
Years Ended
-----------------------------------
Sept. 27, Sept. 28, Sept. 30,
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
United States federal statutory rate (benefit) (35.0)% (35.0)% 35.0%
State and local income taxes 0.0 (0.3) 2.9
Goodwill amortization 0.1 0.1 0.1
Losses carried forward for future years 34.9 29.9 --
Other 0.0 0.1 (2.5)
----- ----- -----
0.0% (5.2)% 35.5%
===== ===== =====
</TABLE>
Due to the loss carryforward position, the Company has eliminated its
deferred tax debits and credits. Deferred income taxes will be reinstated when
the carry forwards are recognized for tax purposes.
Significant components of deferred income taxes are as follows:
<TABLE>
<CAPTION>
Years Ended
-----------------------------------
Sept. 27, 1997 Sept. 28, 1996
---------------- --------------
<S> <C> <C>
Current deferred tax debits applicable to:
Benefit plan accruals $ 1,177 $ 1,276
Other 4,787 4,280
-------- --------
5,964 5,556
Valuation allowance (5,964) (5,556)
-------- --------
$ 0 $ 0
======== ========
Noncurrent deferred tax debits (credits) applicable to:
Depreciation and amortization differences $ (3,477) $ (3,827)
Asset revaluations 3,108 490
Losses carried forward for future years 31,029 16,974
Other (646) (523)
-------- --------
30,014 13,114
Valuation allowance (30,014) (13,114)
-------- --------
$ 0 $ 0
======== ========
</TABLE>
BENEFIT PLAN -
The Company sponsors a defined contribution retirement plan available to
all employees who meet plan requirements. The amount of the Company's
contributions are determined by formulas outlined in the plan document. The
Company's contributions to the plan for the years ended September 1997, 1996 and
1995 were $509, $463 and $736 respectively.
The Company does not provide any additional post-retirement benefits to its
employees.
REVENUE RECOGNITION -
The Company recognizes revenue upon shipment of products to customers.
USE OF ESTIMATES -
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements. Estimates also affect the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
F-10
<PAGE> 33
RECLASSIFICATIONS -
Certain balances in the prior year financial statements have been
reclassified to conform with the 1997 presentation.
EARNINGS PER SHARE -
Net income (loss) per share is calculated using the weighted average number
of shares of Common Stock outstanding during each period, adjusted to reflect
the dilutive effect of shares usable for stock options.
RELATED PARTY TRANSACTIONS -
At September 27, 1997, Avondale Mills, Inc. owned 24.8% of the Company's
outstanding Common Stock. Two members of the Company's board of directors are
executives of Avondale Mills, Inc. For the year ending September 27, 1997, the
Company purchased 69% of its yarn requirements (approximately $31,000) from
Avondale Mills, Inc. At September 27, 1997 the Company had no accounts payable
to Avondale Mills.
(2) Accrued Liabilities:
Accrued liabilities include the following amounts at:
<TABLE>
<CAPTION>
Sept. 27, 1997 Sept. 28, 1996
--------------- --------------
<S> <C> <C>
Interest $ 1,835 $ 1,419
Payroll 1,815 1,641
Employee benefits 3,092 3,398
Restructuring and reorganization 8,006 2,494
Other 2,763 2,481
------- -------
$17,511 $11,433
======= =======
</TABLE>
(3) Long-term debt and capital lease obligations:
<TABLE>
<CAPTION>
Sept. 27, 1997 Sept. 28, 1996
-------------- --------------
<S> <C> <C>
Long-term debt -
Notes payable to banks $57,000 $57,000
Senior promissory notes 6,154 7,692
Subordinated Debt 7,500 7,500
Capital leases --
Industrial development bonds 2,907 4,383
Other 530 587
------- -------
74,091 77,162
Less current portion 1,405 1,846
Less long-term debt in default- 70,654 72,191
------- -------
$ 2,032 $ 3,125
======= =======
</TABLE>
In January 1996, the Company entered into a new $60,000, three-year loan
agreement with three of its banks. The proceeds of the loan were used to pay off
a then existing bank credit facility and existing short-term bank lines totaling
$50,000. The remaining $7,000 was used for working capital and capital
expenditures. The loan is secured by substantially all of the Company's accounts
receivable and inventory. At September 27, 1997, $57,000 was outstanding under
this agreement. The facility matures in January 1999. Interest is charged under
variable rate options which approximate the banks' prime rate. The loan
agreement contains certain financial covenant and ratio requirements such as
minimum working capital and net worth and debt to equity and debt coverage as
defined. At September 27, 1997, the Company was not in compliance with certain
terms of the loan agreement (see Note 1) and accordingly interest of 11% has
been paid during the default period.
In January 1996, the Company issued to Robert M. Gintel subordinated notes
in the aggregate amount of $7,500. The notes are subordinated to the Company's
bank debt and certain other senior debt, mature in February 1999 and bear
interest at 10%. Concurrent with the issuance of the notes, Oneita issued to Mr.
F-11
<PAGE> 34
Gintel warrants to purchase 125,000 shares of Oneita Common Stock at $7.00 per
share. The Company is in default under these notes and will remain so until the
non-compliance under the loan agreement discussed above is remedied. During this
period of default, no interest may be paid to the note holders.
In addition to the bank refinancing and subordinated note, in order to
improve liquidity and strengthen the balance sheet, in January 1996 the Company
issued to Avondale Mills, Inc., the Company's largest raw material supplier, a
note in the amount of $7,500. In August 1996, the note along with accrued
interest thereon was converted to Common Stock of the Company at $3.50 per
share.
In December 1988, the Company entered into a $20,000 loan agreement with an
institutional lender which provides for interest at a fixed rate of 11.34%. The
principal is due in semi-annual payments of $1,539. The loan agreement contains
certain financial ratio and covenant requirements such as minimum working
capital, debt to equity and debt coverage, as defined, and stock redemption and
dividend limitations. At September 27, 1997, the Company was not in compliance
with certain terms of the loan agreement (see Note 1).
The following are the scheduled maturities of long-term debt outstanding at
September 27, 1997 before consideration of default:
<TABLE>
<S> <C>
1998 $ 6,154
1999 64,500
</TABLE>
In October 1989, the Company entered into a $10,000 capital lease
obligation with the Industrial Development Board of the City of Fayette, Alabama
through whom industrial development revenue bonds were issued. The bonds bear
interest and fees at a fixed rate of 8.2% per year. The principal is due in
quarterly payments of $313.
Future minimum payments under capital lease obligations consist of the
following at September 27, 1997:
<TABLE>
<S> <C>
1998 $1,676
1999 1,483
2000 451
2001 91
2002 91
Later years 198
------
Total minimum lease payments 3,990
Less amount representing interest 553
------
Present value of net minimum lease payments
( including current portion of $1,405 ) $3,437
======
</TABLE>
Prior to January 1996, the Company had uncommitted bank lines of credit
totaling $30,000 which provided for interest at below the prime rate. During
fiscal 1996 and 1995, the maximum amount of short-term borrowings outstanding
was $25,000 and $30,000, the average amount outstanding was $7,956 and $17,436,
respectively, and the weighted average interest rate was 7.7% and 6.9%,
respectively. Average amounts outstanding were determined by using daily
balances and the weighted average interest rate during the period was computed
by dividing the actual interest expense by the average short-term borrowings
outstanding.
4) Stock options:
The Company has an Incentive Stock Option Plan (the "Option Plan"), which
was approved by the shareholders in 1988, under which 514,652 shares of Common
Stock have been reserved for grants to directors, officers and key employees.
The prices for the shares covered by each option will not be less than 100% of
the fair market value at the date of the grant. Options expire five years from
the date of the grant and become exercisable in installments as determined by
the Board of Directors commencing one year after the date of the grant. No
charges or credits to income are made with regard to options granted under the
Option Plan.
F-12
<PAGE> 35
Transactions under the Option Plan are as follows:
<TABLE>
<CAPTION>
Number Option
of Shares Price
---------- -----
<S> <C> <C>
Outstanding at September 30, 1995 157,881 $6.625 to $12.375
Granted --
Exercised --
Terminated (86,943) $6.625 to $12.375
--------
Outstanding at September 28, 1996 70,938 $6.625 to $12.375
Granted 85,000 $1.750 to $3.750
Exercised --
Terminated (20,025) $6.625 to $12.375
--------
Outstanding at September 27, 1997 135,913 $1.750 to $12.375
========
</TABLE>
The outstanding options expire at various dates through 2002. At September
27, 1997 options for 53,413 shares are exercisable at $6.625 to $12.375 per
share and there are 162,858 options available for grant.
In 1990, the Company's shareholders approved a Non-Qualified Stock Option
Plan under which 453,876 shares of Common Stock have been reserved for grants.
Options expire five years after the date of the grant and become exercisable in
installments as determined by the Board of Directors.
Transactions under the Non-Qualified Stock Option Plan are as follows:
<TABLE>
<CAPTION>
Number Option
of Shares Price
---------- ----------------
<S> <C> <C>
Outstanding at September 30, 1995 251,486 $6.625 to $15.36
Granted --
Exercised --
Terminated (135,424) $6.625 to $15.36
--------
Outstanding at September 28, 1996 116,062 $6.625 to $15.36
Granted 85,000 $1.750 to $3.25
Exercised --
Terminated (19,675) $6.625 to $15.36
--------
Outstanding at September 27, 1997 181,387 $1.750 to $15.36
========
</TABLE>
The outstanding options expire at various dates through 2002. At September
27, 1997, options for 115,554 shares are exercisable at $3.25 to $15.36 per
share and there are 120,383 options available for grant.
In February 1994, the Board of Directors approved the Outside Directors
Stock Option Plan for Oneita Industries, Inc. (the "Directors Plan") under which
60,000 shares of Common Stock have been reserved for grants to outside
directors. The Directors Plan provides for automatic annual grants of 2,000
options to each outside director. The exercise price for the shares covered by
each option will not be less than 100% of the fair market value at the date of
grant. Options expire five years from the date of the grant and become
exercisable after the first anniversary of the grant. At September 27, 1997
there were options to purchase 40,500 shares outstanding with exercise prices of
$1.750 to $12.375 per share.
(5) Consolidation and Restructuring charges:
In September 1997, the Company announced a plan to consolidate certain of
its operations in order to further lower its costs and make its operations more
efficient. The operating results for the year ended September 27, 1997 reflect a
pretax charge of $15,282 related to this consolidation. The consolidation will
involve the closing of one facility, the writedown to estimated fair value of
certain excess production equipment and the shift of more assembly operations to
existing offshore facilities.
The operating results for the year ended September 28, 1996 reflect a
pretax charge of $6,229 to streamline and consolidate the Company's
manufacturing and administrative operations. The charge reflects the costs of
equipment relocation, staff reductions and retraining and transitional employee
salaries and benefits.
F-13
<PAGE> 36
The operating results for the year ended September 30, 1995 reflect a
pretax charge of $4,080 for the write-down of facilities to their fair market
value.
(6) Major Customers and Concentration of Credit Risk:
Major customers are those that individually account for more than 10% of
the Company's consolidated net sales. Sales to one customer were 16.8%, 16.3%
and 17.1% of consolidated net sales in fiscal years 1997, 1996 and 1995,
respectively. The Company has incurred advertising expenses of $3,300, $3,800
and $2,400 for the fiscal years 1997, 1996 and 1995, respectively.
Substantially all of the Company's sales are to apparel distributors and
retailers. This could unfavorably affect the Company's overall exposure to
credit risk inasmuch as these customers could be affected by similar economic or
other conditions. The Company performs periodic credit evaluations of its
customers' financial condition and establishes an allowance for doubtful
accounts based upon factors surrounding the credit risk of specific customers,
historical trends and other information. Historically, the Company's
uncollectible accounts receivable have not been significant, and typically the
Company does not require collateral for its accounts receivable. At September
27, 1997 and September 28, 1996 and September 30, 1995 approximately 39.3%,
41.6% and 46.6%, respectively, of net accounts receivables were represented by
six customers.
In addition, in assessing its concentration of credit risk related to cash
and cash equivalents, the Company places its cash and cash equivalents, which
may at times exceed FDIC insurance limits, in domestic financial institutions.
(7) Commitments:
The Company and its subsidiaries rent real property and equipment under
operating leases expiring at various dates. Most of the real property leases
have escalation clauses relating to increases in real property taxes.
Future minimum payments under noncancelable operating leases (of which
$2,000 relate to payments for equipment considered excess and therefore included
in the 1997 consolidation charge) consist of the following at September 27,
1997:
<TABLE>
<S> <C>
1998 $ 3,777
1999 3,203
2000 1,215
2001 171
Later years 58
-------
$ 8,424
=======
</TABLE>
Rent expense for all operating leases was $4,649, $6,131 and $6,475 for the
years ended September 27, 1997, September 28, 1996 and September 30, 1995,
respectively.
F-14
<PAGE> 37
(8) Quarterly financial information (unaudited):
<TABLE>
<CAPTION>
Quarter Ended
--------------------------------------------------------------------------
Sept. 27, June 28, March 29, Dec. 28,
1997 1997 1997 1996
--------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales $ 33,045 $ 35,549 $ 32,515 $ 33,897
Gross profit (loss) (4,148) 516 77 (742)
Net loss (24,725) (4,782) (5,239) (5,910)
Net loss per share $ (2.70) $ (.52) $ (.57) $ (.65)
</TABLE>
<TABLE>
<CAPTION>
Quarter Ended
------------------------------------------------------------------------------
Sept. 28, June 29, March 30, Dec. 30,
1996 1996 1996 1995
------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales $ 34,711 $ 55,212 $ 43,236 $ 35,187
Gross profit (loss) (12,264) 1,444 (13,482) 554
Net loss (19,728) (5,243) (25,348) (3,374)
Net loss per share $ (2.56) $ (.76) $ (3.68) $ (.49)
</TABLE>
Net (loss) income per share amounts are computed independently for each
of the quarters presented, on the basis described in Note 1. Accordingly,
the sum of the quarters are not equal to the full year net (loss) income
per share amount.
Net losses for the fourth quarter of fiscal 1997 and for the second and
fourth quarters of fiscal 1996 included pre-tax losses of $15,282,
$5,301 and $928, respectively, for restructuring charges as described in
Note 5.
Gross profit (loss) for the fourth quarter of fiscal 1997 was adversely
affected by reduced unit sales prices as compared to the first three
quarters of the year.
F-15
<PAGE> 38
SCHEDULE II
ONEITA INDUSTRIES, INC. AND SUBSIDIARIES - VALUATION AND QUALIFYING ACCOUNTS For
The Years Ended September 27, 1997 and September 28, 1996 and September 30, 1995
(In thousands)
<TABLE>
<CAPTION>
Balance at Additions Charged Balance at
Beginning (Credited) to Costs (Deductions) End of
Description of Period and Expenses Recoveries Period
- ----------- ---------- ------------------- ------------ ----------
<S> <C> <C> <C> <C>
For the Year Ended September 27, 1997:
Allowance for doubtful accounts $1,117 $792 $(1,073) $ 836
For the Year Ended September 28, 1996:
Allowance for doubtful accounts 971 400 (254) 1,117
For the Year Ended September 30, 1995:
Allowance for doubtful accounts 1,006 150 (185) 971
</TABLE>
F-16
<PAGE> 39
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
ONEITA INDUSTRIES, INC.
Form 10-K
EXHIBIT INDEX
Exhibit
Number Exhibit Description
- ------- -------------------
(a) Financial Statements: See Index to Consolidated Financial Statements and
Schedules at page F-1.
(b) Reports on Form 8-K: No reports on Form 8-K were filed by Registrant in
the last quarter of the year covered by this report.
(c) Exhibits:
3.1 Certificate of Incorporation (incorporated by reference to Exhibit
3(a) of Form S-1 Registration Statement No. 33-16972)
3.2 By-laws as amended (incorporated by reference to Exhibit 3.1 of Form
10-Q for the quarter ended March 31, 1994)
10.1 Stock Option Plan (incorporated by reference to Exhibit 10(a) of
Form S-1 Registration Statement No. 33-16972)
10.2 1989 Non-Qualified Stock Option Plan (incorporated by reference to
Exhibit 10.2 of Annual Report on Form 10-K for the year ended
September 30, 1990)
10.3 $60,000 Revolving Credit Agreement dated January 26, 1996 among the
Company, SunTrust Bank, Atlanta, First Union National Bank of South
Carolina and NatWest Bank N.A. (incorporated by reference to Exhibit
10.28 of Form 10-Q for the quarter ended December 31, 1995)
10.4 10% Subordinated Notes dated January 26, 1996 in the principal
amount of $7,500 issued to Robert M. Gintel (incorporated by
reference to Exhibit 10.25 of Form 10-Q for the quarter ended
December 31, 1995)
10.5 Note Agreement dated as of December 20, 1988, between Registrant and
an institutional lender, as amended. (Incorporated by reference to
Exhibit 10.10 of Annual Report on Form 10-K for the year ended
September 30, 1988 and Exhibit 10.26 to Annual Report on Form 10-K
for the year ended September 30, 1995)
10.6 Letter of Credit Agreement dated as of October 1, 1989, between the
Registrant and Trust Company Bank (incorporated by reference to
Exhibit 10.12 of Annual Report on Form 10-K for the year ended
September 30, 1989)
<PAGE> 40
10.7 Lease Agreement dated as of October 1, 1989, between the Registrant
and the Industrial Development Board of the City of Fayette, Alabama
(incorporated by reference to Exhibit 10.13 of the Annual Report on
Form 10-K for the year ended September 30, 1989)
10.8 Guaranty Agreement dated as of October 1, 1989, between the
Registrant and Trust Company Bank (incorporated by reference to
Exhibit 10.14 of Annual Report on Form 10-K for the year ended
September 30, 1989)
10.9 Form of Indemnification Agreement between Registrant and its
officers and directors (incorporated by reference to Exhibit 28 to
Current Report on Form 8-K dated July 30, 1991)
10.10 Modification to Management Services Contract dated February 5, 1993
(incorporated by reference to Exhibit 28 to Current Report on Form
8-K dated January 1, 1993)
10.11 Registration Rights Letter Agreement between the Registrant and
Gintel & Co. Limited Partnership (incorporated by reference to
Exhibit 10 to Current Report on Form 8-K dated October 6, 1993)
10.12 Letter Agreement dated October 5, 1993, between Gintel & Co. Limited
Partnership and Instrument Systems Corporation (incorporated by
reference to Exhibit 2 to Current Report on Form 8-K dated October
6, 1993)
10.13 Note Purchase Agreement dated as of December 28, 1995 among
Registrant, Robert M. Gintel and Avondale Mills, Inc. (incorporated
by reference to Exhibit 10.24 of Annual Report on Form 10-K for the
year ended September 30, 1995)
10.14 Agreement dated August 15, 1996 (related to note conversion) between
Registrant and Avondale Mills, Inc. (incorporated by reference to
Exhibit 10.17 of the Annual Report on Form 10-K for the year ended
September 28, 1996)
11 Computation of Earnings Per Share*
22 The following lists the Company's significant subsidiaries, all of
which are wholly-owned by the Company. The names of certain
subsidiaries which do not, when considered in the aggregate,
constitute a significant subsidiary have been omitted.
Name of Subsidiary Jurisdiction of Incorporation
------------------ -----------------------------
Oneita - Kinston Corp. North Carolina
Oneita - Strathleven Limited Jamaica
Oneita Freeport Limited Jamaica
Oneita Mexicana S. A. de C.V. Mexico
23 Consent of Arthur Andersen LLP*
27 Financial Data Schedule*
---------------------------------
* Filed herewith
<PAGE> 1
EXHIBIT 11
ONEITA INDUSTRIES, INC.
Statement Regarding Computation of Per Share Earnings
For the Years Ended September 27, 1997, September 28, 1996
and September 30, 1995
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Years Ended
--------------------------------------------------
Sept. 27, 1997 Sept. 28, 1996 Sept. 30 1995
--------------------------------------------------
<S> <C> <C> <C>
Net (loss) income per share:
Net (loss) income $(40,656) $(53,693) $2,820
======== ======== ======
Shares:
Weighted average shares 9,149 7,084 6,922
Add shares related to dilutive effect of
outstanding stock options -- -- 62
-------- -------- ------
Weighted average number of shares
outstanding 9,149 7,084 6,984
======== ======== ======
Net (loss) income per share $ (4.44) $ (7.58) $ .40
======== ======= ======
</TABLE>
<PAGE> 1
EXHIBIT 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our report,
dated November 21, 1997, included in Oneita Industries, Inc.'s Form 10K for the
year ended September 27, 1997, and to the incorporation by reference of our
report into the Company's previously filed Registration Statements on Form S-8
(Registration No. 33-30576, 33-34778, 33-62970 and 33-75834) and Registration
Statements on Form S-3 (Registration Nos. 33-88600 and 33-70524), and to all
references to our Firm included in these Registration Statements.
/s/ Arthur Andersen LLP
Columbia, South Carolina,
December 30, 1997.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information extracted from the
consolidated financial statements for the year ended September 27, 1997 and is
qualified in its entirety by reference to such statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-27-1997
<PERIOD-END> SEP-27-1997
<CASH> 1,654,000
<SECURITIES> 0
<RECEIVABLES> 18,036,000
<ALLOWANCES> 836,000
<INVENTORY> 31,214,000
<CURRENT-ASSETS> 51,092,000
<PP&E> 41,073,000
<DEPRECIATION> 8,340,000
<TOTAL-ASSETS> 86,977,000
<CURRENT-LIABILITIES> 93,687,000
<BONDS> 2,032,000
0
0
<COMMON> 2,287,0000
<OTHER-SE> (11,029,000)
<TOTAL-LIABILITY-AND-EQUITY> 86,977,000
<SALES> 135,006,000
<TOTAL-REVENUES> 135,006,000
<CGS> 139,303,000
<TOTAL-COSTS> 139,303,000
<OTHER-EXPENSES> 28,496,000
<LOSS-PROVISION> 792,000
<INTEREST-EXPENSE> 7,863,000
<INCOME-PRETAX> 40,656,000
<INCOME-TAX> 0
<INCOME-CONTINUING> 40,656,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 40,656,000
<EPS-PRIMARY> 4.44
<EPS-DILUTED> 4.44
</TABLE>
