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 JUNE 30, 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 July 31, 1995, there were 10,730,214 outstanding shares of
the registrant's Common Stock, $0.01 par value.
BISCAYNE APPAREL, INC.
INDEX
[CAPTION]
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Part I. Financial Information Page No.
Consolidated Balance Sheets
June 30, 1995 and December 31, 1994.....
Consolidated Statements of Operations
Three and Six Months Ended June 30, 1995
and 1994................................
Consolidated Statements of Cash Flows
Six Months Ended June 30, 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..............................
</TABLE>
BISCAYNE APPAREL, INC.
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
[CAPTION]
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JUNE 30, DECEMBER 31,
1995 1994
(Unaudited)
ASSETS
Current assets:
Cash and cash
equivalents..... $ 955 $ 4,178
Trade accounts
receivable, less
allowances of $1,269
in 1995 and $802
in 1994........ 11,982 21,009
Inventories...... 38,224 22,584
Prepaid expenses
and other...... 1,505 833
Total current
assets.... 52,666 48,604
Property, plant and
equipment, less
accumulated depreciation
of $1,641 in 1995 and
$1,179 in 1994... 3,454 2,984
Investment in Hartwell
Sports, Inc...... 1,594 1,505
Goodwill, net...... 5,115 5,202
Other assets, net.. 3,830 2,142
$ 66,659 $ 60,437
LIABILITIES AND STOCKHOLDERS'
EQUITY
Current liabilities:
Accounts payable. $ 5,421 $ 6,060
Accrued liabilities 4,541 6,973
Notes payable to
banks.......... 20,142 8,500
Current portion of
long-term debt.. 1,250 -
Senior subordinated
bridge notes.... - 4,776
Total current
liabilities. 31,354 26,309
Subordinated notes... 6,444 7,944
Long-term debt....... 6,250 -
Other liabilities.... 71 303
Commitments and
contingencies...... - -
Stockholders' Equity:
Common stock, $0.01
par value; 25,000,000
shares authorized;
10,730,214 issued and
outstanding in 1995
and 10,223,899 in
1994............. 107 102
Additional paid-in capital 26,295 25,225
Unearned stock award
compensation....... (169) (203)
Retained earnings
(deficit).......... (3,693) 757
Total stockholders'
equity....... 22,540 25,881
$ 66,659 $ 60,437
See accompanying notes.
</TABLE>
BISCAYNE APPAREL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands of dollars, except per share data)
(Unaudited)
[CAPTION]
<TABLE>
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THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
1995 1994 1995 1994
Net sales......... $ 14,517 $ 9,367 $ 29,906 $ 15,914
Operating costs and
expenses:
Cost of goods sold 11,194 7,076 22,718 12,227
Selling, general
and administrative 5,468 2,981 11,432 6,038
Operating loss.... (2,145) (690) (4,244) (2,351)
Other income and
(expenses):
Interest and other
expenses....... (806) (295) (1,402) (516)
Interest and other
income......... 36 19 68 57
Equity in net income
of investees... 20 33 83 33
Loss before income tax
benefit........... (2,895) (933) (5,495) (2,777)
Income tax benefit. (1,108) (363) (2,120) (1,058)
Net loss........... $ (1,787) $ (570) $ (3,375) $ (1,719)
Net loss per common
share............ $ (0.17) $ (0.06) $ (0.31) $ (0.19)
Shares used in computing
loss per common
share............10,730,214 8,953,232 10,730,214 8,953,232
See accompanying notes.
</TABLE>
BISCAYNE APPAREL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
[CAPTION]
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SIX MONTHS ENDED
JUNE 30,
1995 1994
Operating activities:
Net loss.............................. $ (3,375) $ (1,719)
Adjustments to reconcile net loss to
net cash used in operating activities:
Gain (loss) on sale of assets...... (3) 2
Equity in net income of Hartwell Sports,
Inc............................... (89) (33)
Amortization of unearned stock award
compensation...................... 34 34
Depreciation expense............... 250 189
Amortization expense............... 62 106
Provision for losses and sales
allowances on receivables......... 597 689
(Increase) decrease in operating assets:
Trade accounts receivable........... 8,430 5,616
Inventories......................... (15,640) (14,304)
Prepaid expenses and other.......... (672) (772)
Other assets........................ (1,671) (718)
Increase (decrease) in operating
liabilities:
Accounts payable.................... (639) 4,867
Accrued liabilities................. (2,416) (1,917)
Other liabilities................... (228) (4)
Net cash used in operating
activities...................... (15,360) (7,964)
Investing activities:
Net sale of assets.................... 8 1
Capital expenditures.................. (725) (848)
Equity investment in Hartwell Sports,
Inc.................................. - (1,500)
Proceeds of note on net sale of assets - 50
Net cash used in investing activities (717) (2,297)
Financing activities:
Payments under notes payable to banks. (14,675) (8,600)
Borrowings under notes payable to banks 26,317 18,650
Proceeds from term loan............... 7,500 -
Repayment of subordinated notes....... (6,276) -
Principal payments of capital leases.. (12) (23)
Net cash provided by financing
activities........................ 12,854 10,027
Net decrease in cash and cash
equivalents............................ (3,223) (234)
Cash and cash equivalents at beginning
of year................................ 4,178 1,568
Cash and cash equivalents at
end of year............................ $ 955 $ 1,334
Supplemental disclosure information:
Interest expense paid.................. $ 1,385 $ 515
Income taxes paid...................... $ 1,253 $ 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 and six month periods
ended June 30, 1995 and 1994 are not necessarily indicative of
the results to be expected for the full year.
4. Earnings per common share are 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. Earnings per share
and weighted average shares have been restated for the
Company's May 1995 stock dividend. See Note 6 for further
information.
5. Included in accounts payable at June 30, 1995 and June 30,
1994 are the Company's obligations under outstanding letters
of credit of $1,149,000 and $3,356,000, 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 was entitled to receive one share of
Common Stock for every 20 shares held. Cash was 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 was 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):
[CAPTION]
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Pro Forma Data Pro Forma Data
for the Three for the Six
Months ended 6/30/94 Months Ended 6/30/94
Net Sales........ $ 18,466 $ 32,329
Loss Before Income
Tax Benefit..... $ (916) $ (3,680)
Net Loss.......... $ (538) $ (2,247)
Loss Per Share..... $ (0.05) $ (0.21)
Shares Used in
Computing Pro
Forma Loss Per
Share............. 10,703,579 10,703,579
</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 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 to expire December 31,
1997. The M&L Agreement was retired 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 June 30, 1995 versus Quarter Ended June 30, 1994:
Net sales increased from second quarter 1994 net sales of
$9,367,000 to $14,517,000 in the second quarter of 1995. Pro forma
net sales for the 1994 quarter, including M&L, which was acquired
on November 30, 1994, were $18,466,000. The decrease relating to
pro forma sales was attributable to lower sales at Andy Johns,
Mackintosh and M&L, offset by increased sales at Varon. Several
unusual and temporary factors combined in 1995 to create an
unfavorable operating performance for the period ended June 30,
1995. These factors included the effects of one of the warmest
winters in recent history, which caused both outerwear retailers
and manufacturers to carryover higher levels of inventory from the
1994 to the 1995 season. This resulted in delayed ordering of Fall
1995 merchandise well beyond the normal time frame. The Company's
consolidated sales backlog as of July 28, 1995 was $56,189,000
versus $57,122,000 as of July 28, 1994.
Cost of goods sold as a percentage of net sales was 77% versus 76%
for the quarters ended June 30, 1995 and 1994, respectively.
The increase was mainly attributable to increased raw material
costs and increased domestic labor costs.
Selling, general and administrative expenses ("S,G&A") as a
percentage of net sales increased from 32% for the second quarter
of 1994 to 38% in the second quarter of 1995, primarily due to the
inclusion of M&L. Pro forma S,G&A as a percentage of net sales for
the 1994 quarter was 31%. The increase from 1994 pro forma results
was due to lower sales levels.
OTHER
Interest and other expense for the quarter ended June 30, 1995
increased $511,000 from the comparable quarter of 1994. The
increase was primarily due to increased borrowings incurred in
connection with the acquisition of M&L and increased inventory
levels.
Interest income and other income increased by $17,000 in the second
quarter of 1995, compared to the second quarter of 1994 due to
foreign currency translation gains relating to M&L.
SIX MONTHS ENDED JUNE 30, 1995 VERSUS SIX MONTHS ENDED JUNE 30,
1994
Net sales for the six months ended June 30, 1994 increased from
$15,914,000 to $29,906,000 for the comparable 1995 period. Pro
forma net sales for the 1994 first half were $32,329,000. The
decrease to pro forma was primarily attributable to decreased sales
at Andy Johns and Mackintosh, offset by increased sales at M&L and
Varon.
Cost of goods sold as a percentage of net sales decreased slightly
from 77% for the six months ended June 30, 1994, to 76% for the
first half of 1995, due to the inclusion of M&L's increased sales.
Selling, general and administrative expenses ("S,G&A") as a
percentage of net sales remained constant at 38% for the periods
ending June 30, 1995 and 1994.
OTHER
Interest and other expenses for the six months ended June 30, 1995
increased to $1,402,000 versus $516,000 for the six months ended
June 30, 1994. The increase was due to higher seasonal bank
borrowings, 70% of which relates to the M&L subsidiary, increased
bank interest rates, and higher inventory levels.
Interest and other income increased from $57,000 for the first half
of 1994, to $68,000 for the first half of 1995 due to increases
relating to M&L's foreign currency translation gains, offset by
decreases in interest income as a result of lower cash balances
invested and lower bank interest rates.
INCOME TAXES
For the quarters and six months ended June 30, 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 $2,955,000 and $4,178,000 at June
30, 1995 and December 31, 1994, respectively. At June 30, 1995,
the Company's working capital was $21,312,000, representing a
current ratio of 1.7:1. This compares to working capital of
$22,295,000 and a current ratio of 1.85:1 at December 31, 1994. The
decrease in the working capital ratio is due to higher year to date
losses and increased short-term outstanding bank borrowings to fund
increased inventory levels.
As presented in the Consolidated Statements of Cash Flows for the
six months ended June 30, 1995, the decrease in accounts receivable
of $8,430,000 and the increase in inventories of $15,640,000 are
due to the seasonality of the Company's operations and increased
levels of carryover 1994 inventory. The net increase in cash from
financing activities of $12,854,000 is due to the Company's
seasonality and the refinancing of debt from the M&L acquisition.
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
retired 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 retired 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 six months ended June 30, 1995
decreased to $725,000 from $848,000 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.
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 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY-HOLDERS
(a) The Registrant held its Annual Meeting of
Shareholders on May 24, 1995.
(b) Not required.
(c) The matters voted on at the Annual Meeting of
Shareholders, and the tabulation of votes on each
matter are as follows:
1. Election of Directors
[CAPTION]
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Name For Against
Harold E. Berritt 7,270,829 -0-
Lewis A. Engman 7,270,829 -0-
Phillip T. George,
M.D. 7,064,232 -0-
Joseph G. Gildenhorn 7,270,829 -0-
Kurt C. Gutfreund 7,270,829 -0-
John W. Partridge 7,270,304 -0-
James J. Pinto 7,270,829 -0-
John E. Pollack 7,269,955 -0-
Earl W. Powell 7,064,232 -0-
Peter Vandenberg,
Jr. 7,064,511 -0-
(continued)
<S> <C> <C>
Broker
Withheld Non-Votes
Harold E. Berritt 12,159 -0-
Lewis A. Engman 12,159 -0-
Phillip T. George,
M.D. 218,756 -0-
Joseph G. Gildenhorn 12,159 -0-
Kurt C. Gutfreund 12,159 -0-
John W. Partridge 12,684 -0-
James J. Pinto 12,159 -0-
John E. Pollack 13,033 -0-
Earl W. Powell 218,756 -0-
Peter Vandenberg,
Jr. 218,477 -0-
</TABLE>
2. Adoption of the Company's 1994 Stock Option
Plan
[CAPTION]
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Broker
For Against Abstentions Non-Votes
6,511,766 325,710 70,566 374,946
</TABLE>
(d) Not applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
a) Exhibits:
Exhibit 11 - Computation of Per Share Earnings
Exhibit 27.1 - Financial Data Schedule
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: August 9, 1995 By: /s/ John E. Pollack
John E. Pollack
President and Chief
Executive Officer
Date: August 9, 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)
[CAPTION]
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THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
1995 1994 1995 1994
Net loss.............. $ (1,787) $ (570) $ (3,375) $ (1,719)
PRIMARY:
Common and common equivalent
shares:
Weighted average common
shares out-
standing......... 10,730,214 8,953,232 10,730,214 8,953,232
Potential dilution upon
exercise of stock
options and warrants - - - -
Shares used in computation
of earnings per common
share............ 10,730,214 8,953,232 10,730,214 8,953,232
PER SHARE AMOUNTS:
Net loss per share $ (0.17) $ (0.06)$ (0.31) $ (0.19)
FULLY DILUTED:
Common and common equivalent
shares:
Weighted average common shares
outstanding..... 10,730,214 8,953,232 10,730,214 8,953,232
Potential dilution upon
exercise of stock options
and warrants.... - - - -
Shares used in computation
of earnings per common
share............ 10,730,214 8,953,232 10,730,214 8,953,232
PER SHARE AMOUNTS:
Net loss per share. $ (0.17) $ (0.06) $ (0.31) $ (0.19)
</TABLE>
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<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Registrant's unaudited consolidated financial statements as of and for the six
months ended June 30, 1995 included elsewhere herein and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> JUN-30-1995
<CASH> 955
<SECURITIES> 0
<RECEIVABLES> 13,251
<ALLOWANCES> (1,269)
<INVENTORY> 38,224
<CURRENT-ASSETS> 52,666
<PP&E> 5,095
<DEPRECIATION> (1,641)
<TOTAL-ASSETS> 66,659
<CURRENT-LIABILITIES> 31,354
<BONDS> 0
<COMMON> 107
0
0
<OTHER-SE> 22,433
<TOTAL-LIABILITY-AND-EQUITY> 66,659
<SALES> 29,906
<TOTAL-REVENUES> 29,906
<CGS> 22,718
<TOTAL-COSTS> 22,718
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,402
<INCOME-PRETAX> (5,495)
<INCOME-TAX> (2,120)
<INCOME-CONTINUING> (3,375)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,375)
<EPS-PRIMARY> (0.31)
<EPS-DILUTED> (0.31)
</TABLE>
