<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarterly Period Ended Commission File Number:
June 29, 1996 0-23234
L.A. T SPORTSWEAR, INC.
- -------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Georgia 58-1724902
- -------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1200 Airport Road, Ball Ground, Georgia 30107
- -------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (770) 479-1877
-----------------------
Not applicable
- -------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report)
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 reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
--- ---
Indicate the number of shares outstanding of each of the registrant's classes
of common stock, as of the latest practicable date:
Common Stock, without par value 4,200,001 shares
- -------------------------------------------------------------------------------
Class Outstanding at August 10, 1996
<PAGE> 2
PART I. FINANCIAL INFORMATION
Item 1: Financial Statements
L.A. T SPORTSWEAR, INC.
<TABLE>
<CAPTION>
BALANCE SHEETS
(Dollars in thousands)
- -------------------------------------------------------------------------------
June 29, December 30,
ASSETS 1996 1995
(Unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash $ 1,755 $ 2,784
Accounts receivable, net 13,831 11,948
Inventories 25,585 33,104
Other current assets 3,169 3,513
------- -------
Total current assets 44,340 51,349
PROPERTY, PLANT, AND EQUIPMENT 5,339 5,841
OTHER ASSETS 451 192
------- -------
$50,130 $57,382
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 8,339 $ 8,354
Restructuring reserve 1,522 2,050
Current portion of long-term debt 43 30,328
Accrued expenses 1,395 1,606
------- -------
Total current liabilities 11,299 42,338
LONG-TERM DEBT 24,539 821
DEFERRED INCOME TAXES 547 578
STOCKHOLDERS' EQUITY:
Preferred stock, 5,000,000 shares
authorized; no shares issued
Common stock, no par value; 25,000,000
shares authorized; 4,200,001 shares
issued and outstanding 10,825 10,825
Paid-in capital 3,304 3,304
Accumulated deficit (384) (484)
------- -------
Total stockholders' equity $13,745 $13,645
------- -------
$50,130 $57,382
======= =======
</TABLE>
See notes to unaudited financial statements.
-1-
<PAGE> 3
L.A. T SPORTSWEAR, INC.
<TABLE>
<CAPTION>
STATEMENTS OF OPERATIONS (UNAUDITED)
(In thousands, except per share data)
- ---------------------------------------------------------------------------------------------------
Quarter Ended Six Months Ended
----------------------- -----------------------
June 29, July 1, June 29, July 1,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
NET SALES $30,222 $37,942 $53,566 $63,174
COST OF GOODS SOLD 24,213 31,395 43,575 51,258
------- ------- ------- -------
Gross profit 6,009 6,547 9,991 11,916
OPERATING EXPENSES 4,570 4,942 8,626 9,350
------- ------- ------- -------
OPERATING PROFIT 1,439 1,605 1,365 2,566
INTEREST EXPENSE 591 537 1,194 956
------- ------- ------- -------
INCOME BEFORE INCOME TAXES 848 1,068 171 1,610
PROVISION FOR INCOME TAXES 322 433 71 661
------- ------- ------- -------
NET INCOME $ 526 $ 635 $ 100 $ 949
======= ======= ======= =======
NET INCOME PER SHARE $ 0.13 $ 0.15 $ 0.02 $ 0.23
======= ======= ======= =======
WEIGHTED AVERAGE SHARES OUTSTANDING 4,200 4,200 4,200 4,200
======= ======= ======= =======
</TABLE>
See notes to unaudited financial statements.
-2-
<PAGE> 4
L.A. T SPORTSWEAR, INC.
<TABLE>
<CAPTION>
STATEMENTS OF CASH FLOWS (UNAUDITED)
(Dollars in thousands)
- ---------------------------------------------------------------------------------------------------------------
Six Months Ended
----------------------------
June 29, July 1,
1996 1995
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 100 $ 949
Adjustments to reconcile net income to net
cash provided by (used in) operating activities:
Depreciation and amortization 430 371
Net loss on disposal of assets 85 2
Changes in assets and liabilities providing (using) cash:
Accounts receivable (1,883) (11,583)
Due from factor 4,016
Inventories 7,519 (23,399)
Other assets 54 (597)
Accounts payable (15) 19,761
Accrued expenses (211) (126)
Restructuring reserve (528) 0
-------- --------
Net cash provided by (used in) operating activities 5,551 (10,606)
INVESTING ACTIVITIES:
Purchase of property, plant, and equipment (123) (1,328)
Proceeds from sale of assets 110 0
-------- --------
Net cash used in investing activities (13) (1,328)
FINANCING ACTIVITIES:
Net borrowings under lines of credit 19,180 11,495
Payment of previous line of credit (24,119)
Payments of long-term borrowings (1,628) (365)
Proceeds from long-term borrowings 1,402
-------- --------
Net cash (used in) provided by financing activities 6,567) 12,532
-------- --------
NET CHANGE IN CASH (1,029) 598
CASH - Beginning of period 2,784 395
-------- --------
CASH - End of period $ 1,755 $ 993
======== ========
</TABLE>
See notes to unaudited financial statements.
-3-
<PAGE> 5
L.A. T SPORTSWEAR, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
QUARTERS ENDED JUNE 29, 1996 AND JULY 1,1995
1. ORGANIZATION AND BASIS OF PRESENTATION
L.A. T Sportswear, Inc. (the "Company") manufactures imprintable and
decorable sportswear and distributes undecorated garments for the imprinted
garment industry. The Company also purchases merchandise from several national
sportswear manufacturers for distribution through seven distribution facilities
located across the United States. The Company's customers consist principally
of single location retailers in the imprintable and decorable sportswear
industry. Such customers operate principally within North America
The accompanying unaudited financial statements of the Company have
been prepared in accordance with generally accepted accounting principles for
interim financial information and the instructions for Form 10-Q. Accordingly,
certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted. These financial statements should be read in
conjunction with the financial statements and notes thereto included in the
Company's Annual Report on Form 10-K filed with the Securities and Exchange
Commission for the year ended December 30, 1995. In the opinion of management,
all adjustments (which include only normal recurring adjustments) considered
necessary for a fair presentation of interim results have been included. The
results of operations for the six months ended June 29, 1996 are not
necessarily indicative of the operating results for the full year.
2. INVENTORIES
Inventories consisted of the following (in thousands):
<TABLE>
<CAPTION>
June 29, December 30,
1996 1995
<S> <C> <C>
Raw materials $ 1,085 $ 1,099
Work-in-process 514 1,170
Finished goods 23,986 30,835
------- -------
$25,585 $33,104
======= =======
</TABLE>
3. LONG-TERM DEBT
On April 29, 1996, the Company entered into a $35 million credit
facility ("new facility") with a new financial institution. The new facility
(i) initially provides for maximum borrowings of $35 million which decline to
$30 million on July 31, 1996 (subject to certain collateral restrictions based
on eligible receivables, inventories and fixed assets), (ii) expires in the
second quarter of 1999, (iii) bears interest at prime plus 1/2%, (iv) is
secured by principally all the Company's assets, (v) requires the payment of
certain fees, and (vi) contains covenants which (among other things) require
compliance with certain financial tests and restrict corporate activities.
This new facility replaced the previous line of credit and term loan facility
(and all borrowings thereunder were consequently repaid).
4. PENDING LITIGATION
The Company (including certain of its officers and directors) are
defendants in class action suits concerning certain alleged omissions in its
January 1994 initial public offering documents. The plaintiffs seek
unspecified amounts of damages. The Company intends to defend these matters
vigorously. The ultimate outcome of these matters cannot presently be
determined. Accordingly, no provision for any loss that may result from their
resolution has been made in the accompanying financial statements.
-4-
<PAGE> 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.
Results of Operations
The following table sets forth, for the periods indicated, the
components of the Company's statements of operations expressed as a percentage
of net sales.
<TABLE>
<CAPTION>
Quarter Ended Six Months Ended
--------------------- ---------------------
June 29, July 1, June 29, July 1,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Net Sales 100.0% 100.0% 100.0% 100.0%
Cost of goods sold 80.1 82.8 81.3 81.1
----- ----- ----- -----
Gross profit 19.9 17.2
Operating expenses 15.1 13.0 16.2 14.8
----- ----- ----- -----
Operating profit 4.8 4.2 2.5 4.1
Interest expense 2.0 1.4 2.2 1.5
------ ----- ----- -----
Income before income taxes 2.8 2.8 0.3 2.6
Provision for income taxes 1.1 1.1 0.1 1.1
----- ----- ----- -----
Net income 1.7% 1.7% 0.2% 1.5%
===== ===== ===== =====
</TABLE>
Second Quarter of 1996 Compared to Second Quarter of 1995
The Company's net sales decreased approximately $7.7 million, or
20.3%, to $30.2 million in the second quarter of 1996 from $37.9 million in the
second quarter of 1995. The decrease in net sales was primarily attributable
to sluggishness in the industry combined with the closing of two distribution
centers at the end of 1995 that were operating in the second quarter of 1995.
The Company's gross profit decreased approximately $538,000, or 8.2%,
to $6.0 million for the second quarter of 1996 from $6.5 million in the second
quarter of 1995. The decline is directly related to the decrease in net sales.
As a percentage of net sales, gross profit margin increased to 19.9% in the
second quarter of 1996 from 17.2% in the second quarter of 1995 primarily due
to a greater contribution of sales of Company manufactured products which have
a higher gross margin.
Operating expenses decreased approximately $372,000, or 7.5%, to $4.6
million in the second quarter of 1996 from $4.9 million in the second quarter
of 1995. The decrease in operating expenses is due primarily to the Company's
closing of two distribution centers as part of a restructuring plan implemented
during the 1995 fourth quarter. The benefits of the restructuring were
partially offset by increased freight costs and expenses related to collecting
accounts receivable. As a percentage of net sales, operating expenses
increased to 15.1% in the second quarter of 1996 from 13.0% in the second
quarter of 1995.
As a result of the decrease in net sales, operating profit decreased
approximately $166,000, or 10.3%, to approximately $1.4 million in the second
quarter of 1996 from $1.6 million in the second quarter of 1995. As a
-5-
<PAGE> 7
percentage of net sales, operating profit margin was 4.8% in the second quarter
of 1996, compared to 4.2% in the second quarter of 1995.
Interest expense increased approximately $54,000, or 10.1%, to
$591,000 in the second quarter of 1996 from $537,000 in the second quarter of
1995, primarily due to higher interest rates on borrowings under the Company's
line of credit.
Income before income taxes decreased approximately $220,000 to
$848,000 in the second quarter of 1996 from $1,068,000 in the second quarter of
1995. Income before income taxes as a percentage of net sales remained
constant at 2.8% in both the second quarter of 1996 and 1995.
Net income decreased approximately $109,000 to $526,000 in the second
quarter of 1996 from $635,000 in the second quarter of 1995. Net income as a
percentage of net sales remained constant at 1.7% in the second quarter of both
1996 and 1995.
First Six Months of 1996 Compared to First Six Months of 1995
The Company's net sales decreased approximately $9.6 million, or
15.2%, to $53.6 million in the first six months of 1996 from $63.2 million in
the first six months of 1995. The decrease in net sales was primarily
attributable to sluggishness in the industry combined with the closing of two
distribution centers at the end of 1995 that were operating in the first six
months of 1995.
The Company's gross profit decreased approximately $1.9 million, or
16.2%, to $10.0 million for the first six months of 1996 from $11.9 million in
the first six months of 1995. The decline is directly related to the decline
in net sales. As a percentage of net sales, gross profit margin decreased
slightly to 18.7% in the first six months of 1996 from 18.9% in the first six
months of 1995.
Operating expenses decreased approximately $724,000, or 7.7%, to $8.6
million in the first six months of 1996 from $9.4 million in the first six
months of 1995. The decrease in operating expenses is due primarily to the
Company's closing of two distribution centers as part of a restructuring plan
implemented during the 1995 fourth quarter. The benefits of the restructuring
were partially offset by increased freight costs and expenses related to
collecting accounts receivable. As a percentage of net sales, operating
expenses increased to 16.2% in the first six months of 1996 from 14.8% in the
first six months of 1995.
As a result of the decrease in net sales, operating profit decreased
approximately $1.2 million, or 46.8% to $1.4 million in the first six months of
1996 from $2.6 million in the first six months of 1995. As a percentage of net
sales, operating profit decreased to 2.5% in the first six months of 1996 from
4.1% in the first six months of 1995.
Interest expense increased approximately $238,000, or 24.9%, to $1.2
million in the first six months of 1996 from $956,000 in the first six months
of 1995. The increase was due to both higher interest rates and higher
borrowings under the Company's line of credit.
Income before income taxes decreased approximately $1.4 million to
$171,000 in the first six months of 1996 from $1.6 million in the first six
months of 1995. Income before income taxes as a percentage of net sales
decreased to .3% in the first six months of 1996 from 2.6% in the first six
months of 1995.
Net income decreased approximately $849,000 to $100,000 in the first
six months of 1996 from $949,000 in the first six months of 1995. Net income
as a percentage of net sales decreased to .2% in the first six months of 1996
from 1.5% in the first six months of 1995.
-6-
<PAGE> 8
In December 1995, the Company implemented a restructuring plan that
contemplated, among other things, the closing of two distribution facilities.
As a result of the continuing effects of the restructuring plan, combined with
historically slower third and fourth fiscal quarters, management anticipates
that the Company's operating results may decline for the remainder of 1996.
Management continues to focus on operational improvements in order to restore
profitability on a longer-term basis.
Liquidity and Capital Resources
Net cash provided by operations was approximately $5.6 million for the
six months of 1996 compared to net cash used in operations of $10.6 million in
the first six months of 1995. The net cash provided by operations in the first
six months of 1996 was primarily through reduced inventory levels.
On April 29, 1996, the Company entered into a $35 million credit
facility (the "new facility") with a new financial institution. The new
facility (i) initially provides for maximum borrowings of $35 million which
decline to $30 million on July 31, 1996 (subject to certain collateral
restrictions based on eligible receivables, inventories and fixed assets), (ii)
expires in the second quarter of 1999, (iii) bears interest at prime plus
1/2%, (iv) is secured by principally all the Company's assets, (v) requires the
payment of certain fees, and (vi) contains covenants which, among other things,
require compliance with certain financial tests and restrict corporate
activities. This new facility replaced the previous line of credit and term
loan facility (and all borrowings thereunder were consequently repaid). As of
June 29, 1996, the Company had $2.1 million of additional borrowing available
under the new facility.
The Company's ability to fund its working capital and capital
expenditure requirements, make interest payments and meet its other cash
requirements depends, among other things, on internally generated funds and the
continued availability of and compliance with the terms of its credit facility.
Management further believes that internally generated funds and funds available
from the Company's line of credit will be sufficient to meet the Company's
capital requirements and operating needs in fiscal 1996. However, if there is
a significant reduction of internally generated funds, the Company may require
additional funds from outside financing sources. In such event, there can be
no assurance that the Company will be able to obtain such funding as and when
required or on acceptable terms.
Item 4. Submission of Matters to a Vote of Security Holders.
On May 23, 1996, the Company held its 1996 Annual Meeting of
Shareholders. At the meeting, the following persons were elected to serve on
the Company's Board of Directors for a term of one year and until their
successors are elected and have qualified: Isador E. Mitzner, J. David Keller,
Kenneth L. Bernhardt, Nathan Koenigsberg, Irwin Lowenstein and A Gordon
Tunstall. The number of votes cast for and against the election of each
nominee for director was as follows:
<TABLE>
<CAPTION>
Director For Against
-------- --- -------
<S> <C> <C>
Isador E. Mitzner . . . . . . . . . 3,748,687 0
J. David Keller . . . . . . . . . . 3,748,687 0
Kenneth L. Bernhardt . . . . . . . 3,748,687 0
Nathan Koenigsberg . . . . . . . . 3,748,687 0
Irwin Lowenstein . . . . . . . . . 3,748,687 0
A Gordon Tunstall . . . . . . . . . 3,748,687 0
</TABLE>
-7-
<PAGE> 9
PART II. OTHER INFORMATION
<TABLE>
<CAPTION>
Item 6. Exhibits and Reports on Form 8-K
- ------ --------------------------------
<S> <C>
(a) Exhibits.
27 Financial Data Schedule (for SEC use only).
(b) Reports on Form 8-K. No report on Form 8-K was filed
during the quarter ended June 29 1996.
</TABLE>
-8-
<PAGE> 10
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.
L.A. T SPORTSWEAR, INC.
Dated: August 12, 1996 By: /s/ Isador E. Mitzner
-------------------------------------
Isador E. Mitzner, Chairman
and Chief Executive Officer
Dated: August 12, 1996 By: /s/ Robert C. Aldworth
-----------------------------------
Robert C. Aldworth
Chief Operating Officer
(acting principal financial
and accounting officer)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF L.A.T. SPORTSWEAR FOR THE SIX MONTHS ENDED JUNE 29,
1996, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-28-1996
<PERIOD-START> DEC-31-1995
<PERIOD-END> JUN-29-1996
<CASH> 1,755
<SECURITIES> 0
<RECEIVABLES> 16,248
<ALLOWANCES> 2,417
<INVENTORY> 25,585
<CURRENT-ASSETS> 44,340
<PP&E> 8,518
<DEPRECIATION> 3,179
<TOTAL-ASSETS> 50,130
<CURRENT-LIABILITIES> 11,299
<BONDS> 0
0
0
<COMMON> 10,825
<OTHER-SE> 2,920
<TOTAL-LIABILITY-AND-EQUITY> 50,130
<SALES> 53,566
<TOTAL-REVENUES> 53,566
<CGS> 43,575
<TOTAL-COSTS> 43,575
<OTHER-EXPENSES> 8,206
<LOSS-PROVISION> 420
<INTEREST-EXPENSE> 1,194
<INCOME-PRETAX> 171
<INCOME-TAX> 71
<INCOME-CONTINUING> 100
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 100
<EPS-PRIMARY> .02
<EPS-DILUTED> .02
</TABLE>
