<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
( X ) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 27, 1998
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________ to ____________
Commission File Number: 1-9734
ONEITA INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 57-0351045
(State or other jurisdiction of I.R.S. Employer
incorporation or organization) (Identification No.)
4130 FABER PLACE DRIVE, SUITE 200, CHARLESTON, SC 29405
(Address of principal executive offices) (Zip Code)
(803) 529 - 5225
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months, and (2) has been subject to such filing for
the past 90 days.
[X] Yes [ ] No
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date. 9,149,339 shares of
Common Stock as of July 30, 1998.
<PAGE> 2
FORM 10-Q
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION (Unaudited)
Item 1: Financial Statements:
Condensed Consolidated Balance Sheets at
June 27, 1998 and September 27, 1997 ................... 1
Condensed Consolidated Statements of Operations for
the Three Months Ended June 27, 1998 and
June 28, 1997 .......................................... 2
Condensed Consolidated Statements of Operations for
the Nine Months Ended June 27, 1998 and
June 28, 1997 .......................................... 3
Condensed Consolidated Statements of Cash Flows for
the Nine Months Ended June 27, 1998 and June 28, 1997 .. 4
Notes to Condensed Consolidated Financial Statements ... 5
Item 2: Management's Discussion and Analysis of Financial
Condition and Results of Operations .................. 9
PART II - OTHER INFORMATION
Item 1: Legal Proceedings ............................. 14
Item 2: Changes in Securities ......................... 14
Item 3: Defaults upon Senior Securities ............... 14
Item 4: Submission of Matters to a Vote of Security
Holders ....................................... 14
Item 5: Other Information ............................. 14
Item 6: Exhibits and Reports on Form 8-K .............. 14
Signature .................................................... 15
<PAGE> 3
ONEITA INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
<TABLE>
<CAPTION>
June 27, September 27,
1998 1997
---- ----
(Unaudited) (Note 1)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash $ 122 $ 1,654
Accounts receivable, less
allowance for doubtful accounts 14,797 17,200
Inventories (Note 3) 24,818 31,214
Prepaid expenses and other
current assets 866 1,024
--------- --------
Total current assets 40,603 51,092
PROPERTY, PLANT AND EQUIPMENT, at cost,
less accumulated depreciation and
amortization 29,821 32,733
OTHER ASSETS 2,510 3,152
--------- --------
$ 72,934 $ 86,977
========= ========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES: (Note 4)
Long-term debt in default, classified
as current, subject to compromise $ 70,654 $ 70,654
Notes payable 9,954 --
Current portion of capital leases 1,313 1,405
Accounts payable 5,741 4,117
Accrued liabilities 12,308 17,511
--------- --------
Total current liabilities 99,970 93,687
CAPITAL LEASE OBLIGATIONS (Note 4) 1,046 2,032
SHAREHOLDERS' EQUITY:
Preferred Stock, Series I, par
value $1.00 per share, 2,000,000
shares authorized, none issued -- --
Common Stock, $.25 par value,
15,000,000 shares authorized,
9,149,339 shares issued and
outstanding at June 27, 1998
and September 27, 1997 2,287 2,287
Other shareholders' equity (30,369) (11,029)
--------- --------
$ 72,934 $ 86,977
========= ========
</TABLE>
See notes to condensed consolidated financial statements.
1
<PAGE> 4
ONEITA INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended
------------------
June 27, June 28,
1998 1997
---- ----
<S> <C> <C>
Net sales $ 30,764 $ 35,549
Cost of sales 30,904 35,033
-------- --------
Gross (loss) profit (140) 516
Selling, general and administrative
expenses 2,124 2,765
Reversal of consolidation and
restructuring charges (Note 6) (1,300) --
-------- --------
Loss from operations (964) (2,249)
Other expense:
Reorganization expense (Note 2) 790 513
Interest expense (Note 2) 268 2,020
-------- --------
1,058 2,533
Loss before provision for
income taxes (2,022) (4,782)
Benefit for income taxes -- --
-------- --------
Net loss $ (2,022) $ (4,782)
======== ========
Net loss per share (Note 5) $ (.22) $ (.52)
======== ========
</TABLE>
See notes to condensed consolidated financial statements.
2
<PAGE> 5
ONEITA INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per share data)
<TABLE>
<CAPTION>
Nine Months Ended
-----------------
June 27, June 28,
1998 1997
---- ----
<S> <C> <C>
Net sales $ 88,423 $ 101,961
Cost of sales 95,992 102,110
-------- ---------
Gross loss (7,569) (149)
Selling, general and administrative
expenses 7,390 9,256
Reversal of consolidation and
restructuring charges (Note 6) (1,300) --
-------- ---------
Loss from operations (13,659) (9,405)
Other expense:
Reorganization expense (Note 2) 2,675 684
Interest expense (Note 2) 3,007 5,842
-------- ---------
5,682 6,526
Loss before provision for
income taxes (19,341) (15,931)
Benefit for income taxes -- --
-------- ---------
Net loss $(19,341) $ (15,931)
======== =========
Net loss per share (Note 5 ) $ (2.11) $ (1.74)
======== =========
</TABLE>
See notes to condensed consolidated financial statements.
3
<PAGE> 6
ONEITA INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
Nine Months Ended
-----------------
June 27, June 28,
1998 1997
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net loss $(19,341) $(15,931)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 4,292 4,934
Provision for losses on accounts receivable 220 192
Loss (gain) on sale of property and equipment 23 (66)
Change in assets and liabilities:
Decrease in accounts receivables 2,183 7,279
Decrease in inventories 6,396 8,252
Decrease (increase) in prepaid expenses 254 (1,485)
and other assets
Decrease in accounts payable, consolidation
accrual and accrued liabilities (3,578) (4,905)
-------- --------
Net cash used in operating activities (9,551) (1,730)
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property, plant and equipment (910) (2,113)
Proceeds from sale of property, plant
and equipment 52 610
-------- --------
Net cash used in investing activities (858) (1,503)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings under debtor in possession facility 9,954 --
Payment of long-term debt and capital
lease obligations (1,077) (2,744)
-------- --------
Net cash provided by (used in)
financing activities 8,877 (2,744)
-------- --------
NET DECREASE IN CASH (1,532) (5,977)
CASH AT BEGINNING OF PERIOD 1,654 9,135
-------- --------
CASH AT END OF PERIOD $ 122 $ 3,158
======== ========
</TABLE>
See notes to condensed consolidated financial statements.
4
<PAGE> 7
ONEITA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited) (In thousands, except share data)
(1) Basis of Presentation
Oneita Industries, Inc. (the Company) manufactures and markets high
quality activewear including T-shirts and fleecewear, and infantswear primarily
for the newborn and toddler markets. These products are marketed to the
imprinted sportswear industry and to major retailers.
The accompanying condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. The balance sheet at September 27, 1997 has been derived
from the audited financial statements at that date. In the opinion of
management, all adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included. Operating results for the
nine-month period ended June 27, 1998 are not necessarily indicative of the
results that may be expected for the year ended September 26, 1998. For further
information, refer to the consolidated financial statements and footnotes
thereto included in the Company's annual report to shareholders for the year
ended September 27, 1997.
The accompanying consolidated financial statements have been prepared
on the basis of accounting principles applicable to a going concern and
contemplates the realization of assets and the settlement of liabilities and
commitments in the normal course of business. The accompanying consolidated
financial statements do not include any adjustments relating to the
recoverability and classification of recorded asset amounts or the amounts and
classification of liabilities that might result should the Company be unable to
continue as a going concern.
(2) Status of Operations and Bankruptcy Proceedings
The Company incurred a net loss of $40,656 for the year ended September
27, 1997. 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 involved 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.
5
<PAGE> 8
At June 27, 1998, 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 Robert M. Gintel.
Mr. Gintel resigned as Chairman of the Board and as a director of the Company on
August 8, 1997. These obligations, $57,000, $6,154 and $7,500 in principal
amount, respectively, have been classified as current liabilities.
On January 23, 1998, the Company filed a Chapter 11 petition with the United
States Bankruptcy Court for the District of Delaware under Chapter 11 of the
Bankruptcy Code, together with a Plan of Reorganization seeking to implement a
debt restructuring with its lenders and a Disclosure Statement. Subsequently,
an Amended Plan of Reorganization ("Amended Plan")and an Amended Disclosure
Statement were filed in the Chapter 11 case. Pursuant to the Amended Plan, the
restructured obligations, which aggregate $70,654, plus accrued interest and
fees, were expected to 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. Interest on these obligations from January 23
through June 27, 1998 totaling $3,439 has not been accrued and is not payable
under the Amended Plan due to the Chapter 11 case. Should the Amended Plan not
be confirmed by the Bankruptcy Court or other events occur in the bankruptcy
case affecting the Company's ability to implement the Amended Plan, the holders
of these obligations may seek to assert a claim for this interest, however the
Company believes that any claim asserted by the holders of these obligations
for interest after January 23, 1998 will not be allowed. Prior to the
commencement of the Chapter 11 case, the holders of the debt mentioned above
entered into agreements with the Company agreeing, among other things, to
cooperate with the Company in implementing the Amended Plan and delivered
ballots voting in favor of the Plan. A hearing to consider approval of the
Amended Disclosure Statement was held on March 19, 1998 at which time the
Amended Disclosure Statement was approved. A hearing to consider confirmation
of the Amended Plan is scheduled for October 29, 1998 having been previously
adjourned on several occasions. The Company currently projects that it cannot
emerge from the Chapter 11 case pursuant to the terms of the Amended Plan until
April 1999 due to a lack of available working capital. The agreements entered
into with the holders of certain indebtedness to cooperate in implementing the
Amended Plan only required such lenders to support the Amended Plan if the
terms of the underlying documents were not changed. Since the terms have
changed, the Company is unaware to what extent such parties will continue to
cooperate in the implementation of the Amended Plan. Certain of the lenders
have in fact advised the Company that they do not wish to wait until April 1999
and will no longer support the Amended Plan in its current form. The Amended
Plan cannot be implemented over the objection of the parties entering into such
agreements. The Company has filed a motion seeking an extension of the time
period through April 1999 during which only the Company may file a Plan of
Reorganization so that it may seek to implement the Amended Plan or, if
appropriate, a modified Plan of Reorganization. A hearing to consider the
Company's motion has been scheduled for August 19, 1998. Certain of the lenders
have also filed an objection to the Company's motion and there can be no
assurance that such motion will be granted or if granted how long the
Company's exclusivity period will be extended. The Company has obtained
permission from the Bankruptcy Court to continue to pay most pre-petition
claims held by trade creditors in order to avoid any disruption in its
business. In addition, the Company has obtained authority from the Bankruptcy
Court to
6
<PAGE> 9
continue to use cash collateral pursuant to a stipulation and to borrow up to
$10,000 from Foothill Capital Corp. under a Debtor-in-Possession Facility. The
Debtor-in-Possession Facility is secured by a pledge of certain property, plant
and equipment. The Company had obtained a commitment from Foothill Capital
Corp., subject to certain conditions, for a new revolving credit facility
pursuant to which financing would have been available upon emergence from the
Chapter 11 case. This facility would have permitted the borrowing of up to
$35,000 based upon availability under a borrowing base formula (estimated to be
$24,000 at June 27, 1998) and would have been secured primarily by accounts
receivable and inventory. However, such facility expired as the Amended Plan
was not implemented on or before July 31, 1998. The new revolving credit
facility had also required that the Company have at the date of emergence
$5,000 borrowing availability after payments of $15,000 to the holders of the
restructured debt and $9,954 (outstanding at June 27, 1998) under the debtor in
possession facility. At June 27, 1998 the Company would have had no borrowing
availability under this formula.
Of the $38,500 restructured debt under the Amended Plan, $37,500 was
to consist of senior notes due in three years and bearing interest at 12%.
The interest was to accrue but was not to be paid in cash for the first two
years of the note term, except that interest payments in the first two years as
well as note principal prepayments would have been triggered upon the Company
achieving certain targets. The senior notes were to be secured by the pledge as
collateral of certain property, plant and equipment. The remaining $1,000 of
restructured debt was to consist of a subordinated note with principal and
interest, accruing at 10%, payable in 10 years.
In light of the foregoing, there can be no assurance that the Amended
Plan or a consensual modified version of the Amended Plan can be implemented or
that a non-negotiated Chapter 11 case can be avoided. If the Amended Plan were
implemented without any significant changes the Company projects that it will
emerge from the Chapter 11 case in April 1999.
The Company has incurred $2,675 of reorganization expense related to
the debt restructuring and bankruptcy filing during the nine months ended June
27, 1998 and $684 during the nine months ended June 28, 1997.
(3) Inventories
Inventories, stated at the lower of cost or market, are comprised of
the following:
<TABLE>
<CAPTION>
June 27, September 27,
1998 1997
------- -------------
<S> <C> <C>
Finished goods ........... $13,008 $20,095
Work in process .......... 9,261 9,313
Raw materials and supplies 2,549 1,806
------- -------
$24,818 $31,214
======= =======
</TABLE>
7
<PAGE> 10
(4) Liabilities
The following table sets forth prepetition liabilities subject to
compromise from those not subject to compromise and postpetition liabilities as
of June 27, 1998:
<TABLE>
<CAPTION>
Prepetition Liabilities
-------------------------
Not
Subject Subject Post
to to Petition Total
Compromise Compromise Liabilities Liabilities
---------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
Current Liabilities:
Long-term debt in default $70,654 -- -- $ 70,654
Notes payable ........... -- -- $ 9,954 9,954
Current portion of capital
leases .................. -- $ 1,313 -- 1,313
Accounts payable ........ -- 1,301 4,440 5,741
Accrued liabilities ..... 1,575 882 9,851 12,308
------- ------- -------- --------
$72,229 $ 3,496 $ 24,245 $ 99,970
======= ======= ======== ========
Capital Lease Obligations... -- $ 1,046 -- $1,046
======= ======= ======== ========
</TABLE>
(5) Net Loss Per Share
Earnings per share are calculated using the weighted average number of
shares of common stock, and where dilutive, common stock equivalents outstanding
during each period. Shares used in computing per share results were 9,149,339
for each of the periods ended June 27, 1998 and June 28, 1997.
(6) 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 consolidation involved 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 27, 1997 reflected a pretax charge of
$15,282 related to this consolidation of which $8,060 was a non-cash charge and
$7,171 was accrued for cash payments to be made through 1999.
The 1997 consolidation and restructuring charge included a provision
for employee severance and related payments resulting from announced plant
closings and job transfers of $1,986 which was expected to be paid in fiscal
1998. Due to employee reductions through attrition and due to many severed
employees finding comparable jobs at nearby Oneita plants, approximately $1,000
of the original provision will not be spent. Additionally, at June 27, 1998
many consolidation activities related to plant closure costs have been
completed and approximately $300 of the original provision is not expected to
be spent. Accordingly, the Company has reduced its consolidation and
restructuring reserves by crediting operations in the amount of $1,300 in the
third fiscal quarter of 1998. The following table sets forth spending related
to the consolidation.
<TABLE>
<CAPTION>
Plant Employee Equipment
Closure Severance Lease
Costs Payments Payments Total
---------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
Accrued at
Septmember 27, 1997 .......... $ 3,154 $ 1,986 $ 2,031 $ 7,171
Amount paid in the nine
months ended June 27, 1998 ... 1,647 813 720 3,180
Estimated amount remaining at
June 27, 1998 ................ 1,180 200 1,311 2,691
------- ------- -------- --------
Amount credited to operations $ 327 $ 973 $ -0- $ 1,300
======= ======= ======== ========
</TABLE>
8
<PAGE> 11
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
(In thousands)
Results of Operations - Three Months
Net sales for the three months ended June 27, 1998 were $30,764 as
compared to $35,549 in the comparable period of the prior year, a decrease of
$4,785 or 13.5%. The decrease was due to reduced unit selling prices of $3,277
that resulted from an industry wide December 1997 price reduction and a decrease
in units sold of $1,508.
Gross loss for the quarter ended June 27 1998, decreased $656 from
the comparable period of the prior year to a loss of $140. Gross profit, as a
percentage of net sales, decreased to (0.5%) compared to 1.5%. The decrease
was caused by the reduced selling prices mentioned above offset by lower
operating costs resulting from the Company's cost reduction program discussed
in Note 2 of Notes to Condensed Consolidated Financial Statements.
Selling, general and administrative expenses for the three months ended
June 27, 1998 decreased $641 from the comparable period of the prior year as a
result of the Company's cost reduction program discussed in Note 2 of Notes to
Condensed Consolidated Financial Statements.
Interest expense, net of interest income, for the second fiscal quarter
of 1998 was $268 compared to $2,020 for the corresponding period last year. The
decrease was due to interest not accruing since January 23, 1998, the date of
the Company's Chapter 11 filing, on $70,654 of debt subject to restructuring.
Results of Operations - Nine Months
Net sales for the nine months ended June 27, 1998 were $88,423 as
compared to $101,961 in the comparable period of the prior year, a decrease of
$13,538 or 13.3%. The decrease was due primarily to reduced unit selling prices
of $9,423 caused by continued production overcapacity in the industry and lower
priced imports and to sales through January 1998 of inventories at discounted
prices to generate cash flow, as well as an industry wide December 1997 price
reduction. Additionally, due to lower average inventory balances this year
compared to last year, fewer units were sold decreasing sales further by $4,115.
Gross loss for the nine months ended June 27, 1998 of $7,569 increased
$7,420 from the comparable period of the prior year. Gross loss, as a percentage
of net sales, increased to 8.6% compared to 0.1%. The increase in gross loss
was caused by the industry wide December 1997 price reductions and by sales of
inventory in December 1997 and January 1998 at discounted prices to generate
cash flow. These increases in gross loss were offset by generally lower
operating costs resulting from the Company's cost reduction
9
<PAGE> 12
program discussed in Note 2 of Notes to Condensed Consolidated Financial
Statements.
Selling, general and administrative expenses for the nine months ended
June 27, 1998 decreased $1,866 from the comparable period of the prior year as a
result of the Company's cost reduction program discussed in Note 2 of Notes to
Condensed Consolidated Financial Statements. As discussed in Note 2, $2,675 of
legal and professional expenditures were incurred related to the debt
restructuring.
Interest expense, net of interest income, for the first nine months of
fiscal 1998 was $3,007 compared to $5,842 for the corresponding period last
year. The decrease was due to interest not accruing since January 23, 1998, the
date of the Company's Chapter 11 filing, on $70,654 of debt subject to
restructuring, offset by higher rates paid on that same debt through January 23,
1998.
Year 2000 Compliance
Management has initiated a plan to prepare the Company's computer
systems and applications for the Year 2000. The Company expects that it will
replace most of its current non-compliant software by purchasing new integrated
software developed primarily for the textile/apparel industry and that it will
be 75% compliant by March 31, 1999 and a 100% compliant by June 30, 1999. As of
June 27, 1998 the company has spent approximately $100 on the Year 2000
compliance issue and expects total costs to be approximately $600, which the
Company expects to fund out of current operating funds in its fiscal years 1998
and 1999.
Liquidity and Capital Resources
The Company had a working capital deficit of $59,367 at June 27, 1998
compared to a deficit of $42,595 at September 27, 1997. This change was caused
primarily by reductions in accounts receivable and inventories and by $9,954 of
borrowings under a debtor-in-possession facility.
The Company had a decrease in cash of $1,532 in the first nine months
of fiscal 1998 compared to a decrease in cash of $5,977 in the comparable period
last year. Cash used in operating activities for the first nine months of fiscal
1998 was $9,551 compared to $1,730 in the comparable period of last year. The
primary components of cash provided by operating activities for both periods
were decreases in receivables and inventories as well as the adjustment for
depreciation and amortization offset by net losses in both periods. During the
nine months ended June 27, 1998, the Company paid and charged $3,483 to the
consolidation reserve (see Note 6).
Cash used in investing activities for the nine months ended June 27,
1998 consisted mostly of capital expenditures of $910.
At June 27, 1998, 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 Robert M. Gintel.
Mr. Gintel resigned as Chairman of the Board and as a director of the Company on
August 8, 1997. These obligations, $57,000, $6,154 and $7,500 in principal
amount, respectively, have been classified as current liabilities.
On January 23, 1998, the Company filed a Chapter 11 petition with the
United States Bankruptcy Court for the District of Delaware under Chapter 11 of
the Bankruptcy Code, together with a Plan of Reorganization seeking to implement
a debt restructuring with its lenders and a Disclosure Statement. Subsequently,
an Amended Plan of Reorganization ("Amended Plan") and an Amended Disclosure
Statement were filed in the Chapter 11 case. Pursuant to the Amended Plan, the
10
<PAGE> 13
restructured obligations, which aggregate $70,654, plus accrued interest and
fees, were expected to 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. Interest on these obligations from January 23
through June 27, 1998 totaling $3,439 has not been accrued and is not payable
under the Amended Plan due to the Chapter 11 case. Should the Amended Plan not
be confirmed by the Bankruptcy Court or other events occur in the bankruptcy
case affecting the Company's ability to implement the Amended Plan, the holders
of these obligations may seek to assert a claim for this interest, however the
Company believes that any claim asserted by the holders of these obligations
for interest after January 23, 1998 will not be allowed. Prior to the
commencement of the Chapter 11 case, the holders of the debt mentioned above
entered into agreements with the Company agreeing, among other things, to
cooperate with the Company in implementing the Amended Plan and delivered
ballots voting in favor of the Plan. A hearing to consider approval of the
Amended Disclosure Statement was held on March 19, 1998 at which time the
Amended Disclosure Statement was approved. A hearing to consider confirmation
of the Amended Plan is scheduled for October 29, 1998 having been previously
adjourned on several occasions. The Company currently projects that it cannot
emerge from the Chapter 11 case pursuant to the terms of the Amended Plan until
April 1999 due to a lack of available working capital. The agreements entered
into with the holders of certain indebtedness to cooperate in implementing the
Amended Plan only required such lenders to support the Amended Plan if the
terms of the underlying documents were not changed. Since the terms have
changed, the Company is unaware to what extent such parties will continue to
cooperate in the implementation of the Amended Plan. Certain of the lenders
have in fact advised the Company that they do not wish to wait until April 1999
and will no longer support the Amended Plan in its current form. The Amended
Plan cannot be implemented over the objection of the parties entering into such
agreements. The Company has filed a motion seeking an extension of the time
period through April 1999 during which only the Company may file a Plan of
Reorganization so that it may seek to implement the Amended Plan or, if
appropriate, a modified Plan of Reorganization. A hearing to consider the
Company's motion has been scheduled for August 19, 1998. Certain of the
lenders have also filed an objection to the Company's motion and there can be
no assurance that such motion will be granted or if granted how long the
Company's exclusivity period will be extended. The Company has obtained
permission from the Bankruptcy Court to continue to pay most pre-petition
claims held by trade creditors in order to avoid any disruption in its
business. In addition, the Company has obtained authority from the Bankruptcy
Court to continue to use cash collateral pursuant to a stipulation and to
borrow up to $10,000 from Foothill Capital Corp. under a Debtor-in-Possession
Facility. The Debtor-in-Possession Facility is secured by a pledge of certain
property, plant and equipment. The Company had obtained a commitment from
Foothill Capital Corp., subject to certain conditions, for a new revolving
credit facility pursuant to which financing would be available upon emergence
from the Chapter 11 case. This facility would have permitted the borrowing of
up to $35,000 based upon availability under a borrowing base formula (estimated
to be $24,000 at June 27, 1998) and would have been secured primarily by
accounts receivable and inventory. However, such facility expired as the
Amended Plan was not implemented on or before July 31, 1998. The new revolving
credit facility had also required that the Company have at the date of
emergence $5,000 borrowing availability after payments of $15,000 to the
holders of the
11
<PAGE> 14
restructured debt and $9,954 (outstanding at June 27, 1998) under the debtor in
possession facility. At June 27, 1998 the Company would have had no borrowing
availability under this formula.
Of the $38,500 restructured debt under the Amended Plan, $37,500 was
to consist of senior notes due in three years and bearing interest at 12%. The
interest was to accrue but was not to be paid in cash for the first two years
of the note term, except that interest payments in the first two years as well
as note principal prepayments would have been triggered upon the Company
achieving certain targets. The senior notes were to be secured by the pledge as
collateral of certain property, plant and equipment. The remaining $1,000 of
restructured debt was to consist of a subordinated note with principal and
interest, accruing at 10%, payable in 10 years.
In light of the foregoing, there can be no assurance that the Amended
Plan or a consensual modified version of the Amended Plan can be implemented or
that a non-negotiated Chapter 11 case can be avoided. If the Amended Plan were
implemented without any significant changes the Company projects that it will
emerge from the Chapter 11 case in April, 1999.
The Company's liquidity requirements in the Chapter 11 case which are
anticipated to consist primarily of capital expenditures and working capital
requirements are expected to be financed by the use of cash collateral and its
Debtor-in Possession Facility. Upon emergence from the Chapter 11 case, the
Company's liquidity requirements are expected to be financed from operating cash
flow and a new facility principally secured by its accounts receivable and
inventory; however, no assurance can be given that such financing will be
available or sufficient. The opinion of the Company's independent public
accountants covering the financial statements for the year ended September 27,
1997 included a paragraph questioning the Company's ability to continue as a
going concern.
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
12
<PAGE> 15
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.
13
<PAGE> 16
ONEITA INDUSTRIES, INC. AND SUBSIDIARIES
PART II - OTHER INFORMATION
Item 1 Legal Proceedings
None
Item 2 Changes in Securities
None
Item 3 Defaults upon Senior Securities
None
Item 4 Submission of Matters to a Vote of Security Holders
None
Item 5 Other Information
None
Item 6 Exhibits and Reports on Form 8-K
(a) Exhibits
None
(b) Reports on Form 8-K filed during this quarterly period.
None
14
<PAGE> 17
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ONEITA INDUSTRIES, INC.
By: /s/ C. Michael Billingsley
--------------------------------------
C. Michael Billingsley
President and Chief Executive Officer
By: /s/ William H. Boyd
--------------------------------------
William H. Boyd
Vice President and Treasurer
(Principal Accounting Officer)
Date: July 30, 1998
15
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS FOR THE QUARTER ENDED JUNE 27, 1998 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-26-1998
<PERIOD-END> JUN-27-1998
<CASH> 122
<SECURITIES> 0
<RECEIVABLES> 15,901
<ALLOWANCES> 1,104
<INVENTORY> 24,818
<CURRENT-ASSETS> 40,603
<PP&E> 41,898
<DEPRECIATION> 12,077
<TOTAL-ASSETS> 72,934
<CURRENT-LIABILITIES> 99,970
<BONDS> 1,046
0
0
<COMMON> 2,287
<OTHER-SE> (30,369)
<TOTAL-LIABILITY-AND-EQUITY> 72,934
<SALES> 88,423
<TOTAL-REVENUES> 88,423
<CGS> 95,992
<TOTAL-COSTS> 95,992
<OTHER-EXPENSES> 8,765
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,007
<INCOME-PRETAX> (19,341)
<INCOME-TAX> 0
<INCOME-CONTINUING> (19,341)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (19,341)
<EPS-PRIMARY> (2.11)
<EPS-DILUTED> (2.11)
</TABLE>
