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 quarter ended MARCH 31, 1995
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 1-9635
BISCAYNE APPAREL, INC.
(Exact name of registrant as specified in its charter)
Florida 65-0200397
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
1373 Broad Street, Clifton, New Jersey 07013
(Address of principal executive offices) (Zip Code)
(201) 473-3240
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed
all the 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 reports), and (2) has been subject to such filing requirements
for the past 90 days. Yes [X] No [ ]
At April 30, 1995, there were 10,224,227 outstanding shares of
the registrant's Common Stock, $0.01 par value.
BISCAYNE APPAREL, INC.
INDEX
Part I. Financial Information
Consolidated Balance Sheets
March 31, 1995 and December 31, 1994
Consolidated Statements of Operations
Three Months Ended March 31, 1995 and 1994
Consolidated Statements of Cash Flows
Three Months Ended March 31, 1995 and 1994
Notes to Consolidated Financial Statements
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Part II. Other Information
Item 1 - Legal Proceedings
Item 6 - Exhibits and Reports on Form 8-K
Signatures
BISCAYNE APPAREL, INC.
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
<TABLE>
<CAPTION>
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MARCH 31, DECEMBER 31,
1995 1994
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents. . . $ 2,624 $ 4,178
Trade accounts receivable,
less allowances of $1,274
in 1995 and $1,754 in 1994. . 9,240 21,009
Inventories. . . . . . . . . . 30,643 22,584
Prepaid expenses and other . . 1,865 833
Total current assets . . . . 44,372 48,604
Property, plant and equipment, less
accumulated depreciation of
$1,492 in 1995 and $1,388 in
1994 . . . . . . . . . . . . . 3,292 2,984
Investment in Hartwell Sports,
Inc. . . . . . . . . . . . . . 1,568 1,505
Goodwill, net. . . . . . . . . . 5,120 5,202
Other assets, net. . . . . . . . 3,029 2,142
$57,381 $60,437
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable . . . . . . . $ 5,470 $ 6,060
Accrued liabilities. . . . . . 4,359 6,973
Notes payable to banks . . . . 9,000 8,500
Current portion of
long-term debt. . . . . . . . 1,250 -
Senior subordinated bridge
notes . . . . . . . . . . . . - 4,776
Total current liabilities. . 20,079 26,309
Subordinated notes . . . . . . . 6,444 7,944
Other liabilities. . . . . . . . 298 303
Long-term debt . . . . . . . . . 6,250 -
Commitments and contingencies. . - -
Stockholders' Equity:
Common stock, $0.01 par value;
25,000,000 shares authorized;
10,224,227 issued and outstanding
in 1995 and 10,223,899
in 1994 . . . . . . . . . . . 102 102
Additional paid-in capital . . . 25,225 25,225
Unearned stock award
compensation . . . . . . . . . (186) (203)
Retained earnings (deficit). . . (831) 757
Total stockholders' equity . 24,310 25,881
$57,381 $60,437
See accompanying notes.
</TABLE>
BISCAYNE APPAREL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands of dollars, except per share data)
(Unaudited)
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THREE MONTHS ENDED
MARCH 31,
1995 1994
Net sales. . . . . . . . . . . . . . $ 15,389 $ 6,547
Operating costs and expenses:
Cost of goods sold . . . . . . . . 11,524 5,151
Selling, general and administrative 5,964 3,057
Operating loss . . . . . . . . . . . (2,099) (1,661)
Other income and (expenses):
Interest and other expenses. . . . (595) (221)
Interest and other income. . . . . 32 38
Equity in net income of Hartwell
Sports, Inc . . . . . . . . . . . 63 -
Loss before income tax benefit . . . (2,599) (1,844)
Income tax benefit . . . . . . . . . (1,011) (695)
Net loss . . . . . . . . . . . . . . $ (1,588) $ (1,149)
Net loss per common share. . . . . . $ (0.16) $ (0.13)
Shares used in computing loss
per common share . . . . . . . . . 10,224,227 8,526,902
See accompanying notes.
</TABLE>
BISCAYNE APPAREL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
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THREE MONTHS ENDED
MARCH 31,
1995 1994
Operating activities:
Net loss . . . . . . . . . . . . . . .$ (1,588) $ (1,149)
Adjustments to reconcile net loss
to net cash (used in) provided by
operating activities:
Gain on sale of assets. . . . . . . . (3) -
Equity in net income of Hartwell
Sports, Inc. . . . . . . . . . . . . (63) -
Amortization of unearned stock
award compensation . . . . . . . . . 17 17
Depreciation expense. . . . . . . . . 108 92
Amortization expense. . . . . . . . . 57 53
Provision for losses and sales
allowances on receivables. . . . . . 337 228
(Increase) decrease in operating assets:
Trade accounts receivable. . . . . . . 11,432 9,031
Inventories. . . . . . . . . . . . . . (8,059) (3,601)
Prepaid expenses and other . . . . . . (1,032) (416)
Other assets . . . . . . . . . . . . . (870) (453)
Increase (decrease) in operating liabilities:
Accounts payable . . . . . . . . . . . (1,537) 1,664
Accrued liabilities. . . . . . . . . . (1,655) (1,503)
Other liabilities. . . . . . . . . . . (3) (3)
Net cash (used in) provided by
operating activities. . . . . . . . (2,859) 3,960
Investing activities:
Net sale of assets . . . . . . . . . . 9 -
Capital expenditures . . . . . . . . . (422) (550)
Equity investment in Hartwell
Sports, Inc.. . . . . . . . . . . . . - (1,500)
Net cash used in investing
activities. . . . . . . . . . . . . (413) (2,050)
Financing activities:
Payments under notes payable to
banks . . . . . . . . . . . . . . . . (13,825) (2,850)
Borrowings under notes payable
to banks. . . . . . . . . . . . . . . 14,325 -
Proceeds from term loan. . . . . . . . 7,500 -
Repayment of subordinated notes. . . . (6,276) -
Principal payments of capital
leases. . . . . . . . . . . . . . . . (6) (12)
Net cash provided by (used in)
financing activities. . . . . . . . 1,718 (2,862)
Net decrease in cash and cash
equivalents . . . . . . . . . . . . . . (1,554) (952)
Cash and cash equivalents at
beginning of year . . . . . . . . . . . 4,178 1,568
Cash and cash equivalents at
end of year . . . . . . . . . . . . . . $ 2,624 $ 616
Supplemental disclosure information:
Interest expense paid. . . . . . . . . $ 440 $ 221
Income taxes paid. . . . . . . . . . . $ 114 $ 658
See accompanying notes.
</TABLE>
BISCAYNE APPAREL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. The accompanying unaudited consolidated financial
statements, which are for an interim period, do not include
all disclosures provided in the annual consolidated
financial statements. These unaudited consolidated
financial statements should be read in conjunction with the
consolidated financial statements and the footnotes with
respect thereto contained in the Biscayne Apparel, Inc.,
("the Company") 1994 Annual Report on Form 10-K.
The consolidated financial statements of the Company include
the accounts of the parent company, and its wholly-owned
subsidiaries, Biscayne Apparel International, Inc. ("BAII"),
Scientific Products Inc. ("SPI") and M&L International, Inc.
("M&L"), which was acquired in 1994, and its wholly-owned
subsidiaries, Unidex Garments (Philippines), Inc.,
Watersports Garment Manufacturing, Inc., Teri Outerwear
Manufacturing, Inc., GES Sportswear Manufacturing Corp. and
M&L International (H.K.) Limited. BAII operates through two
divisions, Andy Johns Fashions International ("Andy Johns")
and Varon, and its wholly-owned subsidiaries, Mackintosh of
New England Co. and Mackintosh (U.K.) Limited. The Company
holds a 20% interest in Hartwell Sports, Inc. and accounts
for investments in less than 50% owned affiliates, over
which it exercises significant influence, under the equity
method in accordance with Accounting Principle Board Opinion
No. 18. All material intercompany balances and transactions
have been eliminated. Certain amounts included in prior
period financial statements have been reclassified to
conform with the 1995 presentation.
2. In the opinion of the Company, the accompanying unaudited
consolidated financial statements contain all adjustments
(consisting of only normal recurring accruals) necessary for
a fair presentation of the financial statements.
3. The results of operations for the three month period ended
March 31, 1995 and 1994 are not necessarily indicative of
the results to be expected for the full year.
4. Earnings per common share is based on the weighted average
number of common and common equivalent shares outstanding
during the period. Common stock equivalents include
incremental shares from the exercise of stock options and
warrants under the treasury stock method.
5. Included in accounts payable at March 31, 1995 and March 31,
1994, are the Company's obligations under outstanding
letters of credit of $947,000 and $778,000, respectively.
6. On March 10, 1995, the Company's Board of Directors declared
a five percent stock dividend with respect to the Company's
Common Stock par value, $0.01 ("Common Stock"). Each holder
of record on May 24, 1995 is entitled to receive one share
of Common Stock for every 20 shares held. Cash will be paid
in lieu of issuing fractional shares at a price of $2.125
per share, the closing price of the Common Stock on March
10, 1995. The distribution date is May 31, 1995.
7. On November 30, 1994, the Company acquired M&L, a Chicago-
based designer, manufacturer and marketer of infants',
toddlers' and children's outerwear, sportswear, and
swimwear.
The following unaudited pro forma combined financial data
reflects the results of the Company and M&L as if the
Acquisition had occurred on January 1, 1994 (in thousands,
except per share data):
<TABLE>
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Pro Forma Data
for the Three
Months ended 3/31/94
Net Sales................ $ 13,864
Loss Before Income Tax
Benefit................. $ (2,764)
Net Loss................. $ (1,709)
Loss Per Share........... $ (0.17)
Shares Used in Computing
Pro Forma Earnings Per
Share.................. 10,193,899
</TABLE>
8. At December 31, 1994, the Company had a $32,000,000
uncommitted credit agreement (the "BAI Agreement") with
several commercial banks. The BAI Agreement was
collateralized by substantially all of the Company's trade
accounts receivable and imported finished goods inventory,
a first mortgage on Varon's real property, and was
guaranteed by the Company. Under the BAI Agreement, the
Company was restricted from making any cash dividend
payments. The BAI Agreement was to expire on April 30,
1995, but was paid off on March 16, 1995 with proceeds from
the Revolver Agreement (see below).
In connection with the acquisition of M&L, M&L entered into
a three year $23,000,000 committed revolver credit agreement
with a bank ("The M&L Agreement"), which the Company
guaranteed. The M&L Agreement was collateralized by
substantially all of M&L's assets including accounts
receivable, inventories, excess cash deposited in a cash
collateral account and equipment. The M&L Agreement
required specified levels of working capital, minimum
compensating cash balances of $650,000 and compliance with
various financial ratios. The M&L Agreement also restricted
capital expenditures, leases, other borrowings, cash
dividends and other items. The M&L Agreement was to expire
December 31, 1997. The M&L Agreement was paid off on March
16, 1995 with proceeds from the Revolver Agreement (see
below).
On March 16, 1995, the Company entered into an agreement
with several banks for a $56,000,000 two year committed
revolving credit facility (the "Revolver Agreement") and a
$7,500,000 four year term loan (the "Term Loan"), which
replaced the existing BAI Agreement and the M&L Agreement,
and was used to repay debt and other related costs
associated with the M&L acquisition.
The Revolver Agreement and the Term Loan are collateralized
by all of the Company's assets, excluding domestic
inventory, and including all trademarks. Additionally, the
Revolver Agreement and the Term Loan require various
financial covenants and reporting requirements and limit
capital expenditures, cash dividends, other indebtedness,
affiliate transactions, mergers and acquisitions and other
items.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Results of Operations
Quarter Ended March 31, 1995 versus Quarter Ended March 31, 1994:
Net sales for the first quarter of 1995 increased to $15,389,000
from first quarter 1994 net sales of $6,547,000. The increase is
mainly attributable to the addition of M&L, which was acquired on
November 30, 1994.
Consolidated sales backlog at April 30, 1995 were $51,040,000,
compared to $66,725,000 at April 30, 1994. This decrease is due to
the extremely warm winter experienced last year causing both
outerwear manufacturers and retailers to carryover increased levels
of inventory into 1995. The result is that retailers are
hesitating to place orders for Fall 1995 outerwear products as
evidenced by the Company's largest 1994 customer placing orders of
only $342,000, as of April 30, 1995, compared to $11,580,000 as of
April 30, 1994. However, the Company's underwear, daywear and
sportswear operations reflect a sales backlog of $14,684,000 at
April 30, 1995, which exceeds the April 30, 1994 sales backlog of
$10,636,000 by 38%.
Cost of goods sold, as a percentage of net sales, was 75% versus
79% for the quarters ended March 31, 1995 and 1994, respectively.
The decrease is attributable to the addition of M&L in 1995 and
Andy Johns and Mackintosh realizing higher selling prices in 1995.
Selling, general and administrative expenses ("S,G&A"), as a
percentage of net sales, decreased from 47% for the first quarter
of 1994 to 39% in the first quarter of 1995, resulting primarily
from the addition of M&L in 1995, increased sales on fixed S,G&A
expenses and management's efforts to control these costs.
Other
Interest and other expense for the quarter ended March 31, 1995
increased $374,000 from the comparable quarter of 1994. The
increase is primarily due to increased borrowings incurred in
connection with the acquisition of M&L and increased bank interest
rates.
Interest and other income decreased by $6,000 in the first quarter
of 1995, compared with the first quarter of 1994 due to lower cash
balances invested.
Income Taxes
For the quarters ended March 31, 1995 and 1994, the income tax
benefit was greater than the provision which would be derived upon
application of the federal statutory rate, primarily because of
state income tax provisions, non-taxable interest income and non-
deductible amortization of goodwill.
Liquidity and Capital Resources
Cash and cash equivalents were $2,624,000 and $4,178,000 at March
31, 1995 and December 31, 1994, respectively. At March 31, 1995,
the Company's working capital was $24,293,000, representing a
current ratio of 2.2:1. This compares to working capital of
$22,295,000 and a current ratio of 1.85:1 at December 31, 1994.
The increase in the working capital ratio is due to the repayment
of short-term subordinated debt with long-term bank borrowings.
The decrease in cash on hand is largely due to the Company reducing
short-term outstanding bank borrowings.
As presented in the Consolidated Statements of Cash Flows for the
three months ended March 31, 1995, the decrease in accounts
receivable of $11,432,000 and the increase in inventories of
$8,059,000 are due to the seasonality of the Company's operations.
The net increase in cash from financing activities of $1,718,000 is
due to the Company's seasonality and the refinancing of debt, as
discussed below.
At December 31, 1994, the Company had a $32,000,000 uncommitted
credit agreement (the "BAI Agreement") with several commercial
banks. The BAI Agreement was to expire on April 30, 1995, but was
paid off on March 16, 1995 with proceeds from the Revolver
Agreement, as discussed below.
In connection with the acquisition of M&L, M&L entered into a three
year $23,000,000 committed revolver credit agreement with a bank
("The M&L Agreement"), which the Company guaranteed. The M&L
Agreement was to expire December 31, 1997 but was paid off on March
16, 1995 with proceeds from the Revolver Agreement, as discussed
below.
On March 16, 1995, the Company entered into an agreement with
several banks for a $56,000,000 two year committed revolving credit
facility (the "Revolver Agreement"), and a $7,500,000 four year
term loan (the "Term Loan"), which replaced the existing BAI
Agreement and the M&L Agreement, and was used to repay debt and
other related costs associated with the M&L acquisition.
Capital expenditures for the three months ended March 31, 1995
decreased to $422,000 from $550,000 in 1994. The decrease is
primarily due to the 1994 expansion of Varon's Arlington, Georgia
facility, offset by increases as a result of the addition of M&L.
In March 1994, the Company purchased, for $1,500,000, a 20%
interest in Hartwell Sports, Inc., a manufacturer of casual shirts
and jackets. The purchase and subsequent accounting for the
investment is being recorded under the equity method in accordance
with Accounting Principle Board Opinion No. 18.
The Company expects that cash on hand, investments in short-term
securities, investment income, cash from operations and borrowings
under its credit agreement will be sufficient to fund current
operations and to enable the Company to meet its obligations as
they become due.
Effect of Inflation and Seasonality
The Company believes that inflation will not significantly effect
its profit margins or have a material effect on the prices of other
goods and services used in its business operations.
Sales of women's and children's outerwear and children's thermal
underwear are seasonal. Historically, Andy Johns, Mackintosh,
Varon and M&L have significantly higher revenues in the third and
fourth quarters than in the first and second quarters. Therefore,
the results of any interim period are not necessarily indicative of
the results which might be expected during a full year.
Part II. Other Information
Item 1. Legal Proceedings
The Company is, from time to time, involved in routine
litigation. None of such litigation in which the Company is
presently involved is material to its financial position or results
of operations.
Item 6. Exhibits and Reports on Form 8-K.
a) Exhibits:
Exhibit 11 - Computation of Per Share Earnings
b) Reports on Form 8-K:
During the quarter for which this Quarterly Report
on Form 10-Q is filed, the Registrant did not file
any Current Reports on Form 8-K.
SIGNATURES
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:
BISCAYNE APPAREL, INC.
Date: May 15, 1995 By: /s/ John E. Pollack
John E. Pollack
President and Chief
Executive Officer
Date: May 15, 1995 By: /s/ Peter Vandenberg, Jr.
Peter Vandenberg, Jr.
Vice President, Treasurer and
Chief Financial Officer
EXHIBIT 11
Biscayne Apparel, Inc.
Computation of Per Share Earnings
(Dollars in Thousands, Except
Per Share Amounts)
(Unaudited)
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THREE MONTHS ENDED
MARCH 31,
1995 1994
Net loss . . . . . . . . . . . . . $ (1,588) $ (1,149)
PRIMARY:
Common and common equivalent shares:
Weighted average common
shares outstanding. . . . . . . 10,224,227 8,526,902
Potential dilution upon exercise
of stock options and warrants . - -
Shares used in computation of
earnings per common share. . . . 10,224,227 8,526,902
PER SHARE AMOUNTS:
Net loss per share . . . . . . . . $ (0.16) $ (0.13)
FULLY DILUTED:
Common and common equivalent shares:
Weighted average common shares
outstanding . . . . . . . . . . 10,224,227 8,526,902
Potential dilution upon exercise
of stock options and warrants . - -
Shares used in computation of
earnings per common share. . . . 10,224,227 8,526,902
PER SHARE AMOUNTS:
Net loss per share . . . . . . . . $ (0.16) $ (0.13)
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Financial Statements for Biscayne Apparel, Inc. - Form 10-Q
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> MAR-31-1995
<CASH> 2,624
<SECURITIES> 0
<RECEIVABLES> 10,514
<ALLOWANCES> (1,274)
<INVENTORY> 30,643
<CURRENT-ASSETS> 44,372
<PP&E> 4,784
<DEPRECIATION> (1,492)
<TOTAL-ASSETS> 57,381
<CURRENT-LIABILITIES> 20,079
<BONDS> 0
<COMMON> 102
0
0
<OTHER-SE> 24,208
<TOTAL-LIABILITY-AND-EQUITY> 57,381
<SALES> 15,389
<TOTAL-REVENUES> 15,389
<CGS> 11,524
<TOTAL-COSTS> 11,524
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 595
<INCOME-PRETAX> (2,599)
<INCOME-TAX> (1,011)
<INCOME-CONTINUING> (1,588)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,588)
<EPS-PRIMARY> (0.16)
<EPS-DILUTED> (0.16)
</TABLE>
