<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:
September 27, 1997 0-23234
L.A.T SPORTSWEAR, INC.
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(Exact name of registrant as specified in its charter)
Georgia 58-1724902
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1200 Airport Drive, Ball Ground, Georgia 30107
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (770) 479-1877
-----------------------------
Not applicable
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(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
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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 October 14, 1997
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PART I. FINANCIAL INFORMATION
Item 1: Financial Statements
L.A. T SPORTSWEAR, INC.
<TABLE>
<CAPTION>
BALANCE SHEETS
(In thousands except share data)
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SEPTEMBER 27, DECEMBER 28,
ASSETS 1997 1996
(UNAUDITED)
<S> <C> <C>
CURRENT ASSETS:
Cash $ 338 $ 938
Accounts receivable, net 7,488 7,599
Inventories 21,903 20,561
Income tax receivable 144 1,923
Other current assets 828 774
-------------------- -------------------
Total current assets 30,701 31,795
PROPERTY, PLANT AND EQUIPMENT - Net 3,849 4,315
OTHER ASSETS 353 409
-------------------- -------------------
$ 34,903 $ 36,519
==================== ===================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 7,419 $ 4,088
Accounts payable - related parties 1,623 1,049
Current portion of long-term debt 22 22
Accrued expenses 957 948
-------------------- -------------------
Total current liabilities 10,021 6,107
LONG-TERM DEBT 13,515 18,929
DEFERRED INCOME TAXES 566 502
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 (3,328) (3,148)
-------------------- -------------------
Total stockholders' equity $ 10,801 $ 10,981
-------------------- -------------------
$ 34,903 $ 36,519
==================== ===================
</TABLE>
See notes to unaudited financial statements.
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L.A. T SPORTSWEAR, INC.
<TABLE>
<CAPTION>
STATEMENTS OF OPERATIONS (UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
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Quarter Ended Nine Months Ended
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September 27, September 28, September 27, September 28,
1997 1996 1997 1996
<S> <C> <C> <C> <C>
NET SALES $ 19,819 $ 22,857 $ 56,297 $ 76,423
COST OF GOODS SOLD 16,632 19,594 46,800 63,169
--------------- --------------- --------------- ----------------
Gross Profit 3,187 3,263 9,497 13,254
OPERATING EXPENSES 2,644 3,859 8,392 12,486
--------------- --------------- --------------- ----------------
OPERATING PROFIT (LOSS) 543 (596) 1,105 768
OTHER EXPENSES (PRINCIPALLY INTEREST) 343 458 1,269 1,651
--------------- --------------- --------------- ----------------
INCOME (LOSS) BEFORE INCOME TAXES 200 (1,054) (164) (883)
PROVISION FOR (BENEFIT FROM) INCOME
TAXES 16 (71) 16 --
--------------- --------------- --------------- ----------------
NET INCOME (LOSS) $ 184 $ (983) $ (180) $ (883)
=============== =============== =============== ================
NET INCOME (LOSS) PER SHARE $ 0.04 $ (0.23) $ (0.04) $ (0.21)
=============== =============== =============== ================
WEIGHTED AVERAGE SHARES OUTSTANDING 4,200 4,200 4,200 4,200
=============== =============== =============== ================
</TABLE>
See notes to unaudited financial statements.
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L.A. T SPORTSWEAR, INC.
<TABLE>
<CAPTION>
STATEMENTS OF CASH FLOW (UNAUDITED)
(IN THOUSANDS)
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NINE MONTHS ENDED
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SEPTEMBER 27, SEPTEMBER 28,
1997 1996
<S> <C> <C>
OPERATING ACTIVITIES:
Net loss $ (180) $ (883)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Depreciation and amortization 482 663
Loss on sale or write-off of fixed assets (20)
Changes in assets and liabilities providing (using) cash:
Accounts receivable 111 1,324
Inventories (1,342) 7,858
Other assets 1,844 356
Accounts payable 3,905 1,545
Accrued expenses 54 (206)
Restructuring reserve (45) (632)
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Net cash provided by operating activities 4,809 10,025
Investing activities:
Purchase of property, plant and equipment (41) (171)
Proceeds from sale of assets 46 381
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Net cash provided by investing activities 5 210
FINANCING ACTIVITIES:
(Repayments of) borrowings under line of credit, net (5,399) 14,676
Payment of previous line of credit (24,119)
Payments of long-term borrowings (15) (1,639)
------------------ ------------------
Net cash used in financing activities (5,414) (11,082)
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NET CHANGE IN CASH (600) (847)
CASH, BEGINNING OF PERIOD 938 2,784
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CASH, END OF PERIOD $ 338 $ 1,937
================== ==================
</TABLE>
See notes to unaudited financial statements.
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<PAGE> 5
L.A. T SPORTSWEAR, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
QUARTERS ENDED SEPTEMBER 27, 1997 AND SEPTEMBER 28, 1996
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 28, 1996. 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 nine months ended September 27, 1997 are not necessarily
indicative of the operating results to be expected for the full year.
2. INVENTORIES
Inventories consisted of the following (in thousands):
<TABLE>
<CAPTION>
September 27, December 28,
1997 1996
<S> <C> <C>
Raw materials $ 758 $ 771
Work-in-process 247 307
Finished goods 20,898 19,483
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$ 21,903 $ 20,561
================= =================
</TABLE>
3. LONG-TERM DEBT
In April 1996, the Company entered into a new credit facility (the "new
facility"). This new facility was subsequently amended in November 1996 and
March 1997 to modify certain covenants, waive existing defaults and revise the
maximum borrowing amount and interest rate. The new facility, as amended (i)
provides for maximum borrowings of $20 million (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 1.25%,
and (iv) is secured principally by all the Company's assets. As of September 27,
1997, the Company had borrowings totaling $12.9 million outstanding under the
new facility and availability to borrow $3.4 million.
4. NEW ACCOUNTING PRONOUNCEMENT
In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standard No. 128, "Earnings Per Share" ("SFAS
No. 128"). SFAS No. 128 provides for new accounting principles for the
calculation of earnings per share and is effective for both interim and annual
periods ending after December 15, 1997. Early adoption is not permitted. The
Company does not anticipate that this new pronouncement will have a material
impact on the Company's earnings per share calculations.
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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 Nine Months Ended
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September 27, September 28, September 27, September 28,
1997 1996 1997 1996
<S> <C> <C> <C> <C>
Net Sales 100.0% 100.0% 100.0% 100.0%
Cost of goods sold 83.9 85.7 83.1 82.7
------------------ ----------------- ----------------- ------------------
Gross profit 16.1 14.3 16.9 17.3
Operating expenses 13.4 16.9 14.9 16.3
------------------ ----------------- ----------------- ------------------
Operating profit (loss) 2.7 (2.6) 2.0 1.0
Interest expense 1.7 2.0 2.3 2.2
------------------ ----------------- ----------------- ------------------
Income (loss) before income taxes 1.0 (4.6) (0.3) (1.2)
Provision (benefit) for income taxes 0.1 (0.3) 0.0 0.0
------------------ ----------------- ----------------- ------------------
Net income (loss) 0.9% (4.3)% (0.3)% (1.2)%
================== ================= ================= ==================
</TABLE>
Third Quarter of 1997 Compared to Third Quarter of 1996
The Company's net sales decreased approximately $3.0 million, or 13.3 %, to
$19.8 million in the third quarter of 1997 from $22.8 million in the third
quarter of 1996. The decrease in net sales was primarily attributable to
sluggishness in the industry and to the impact of the Company's 1995
restructuring in which its screen print operations were shut down during the
1996 third quarter.
The Company's gross profit decreased approximately $76,000, or 2.3%, to $3.2
million for the third quarter of 1997 from $3.3 million in the third quarter of
1996. Gross profit margin increased to 16.1% in the third quarter of 1997 from
14.3% in the third quarter of 1996. The decline in gross profit is attributable
to the decrease in net sales. The increase in gross profit margin was primarily
attributable to more efficient operations in the manufacturing division and to
special vendor purchase discounts realized in the distribution division during
the third quarter.
Operating expenses decreased approximately $1.3 million, or 31.5%, to $2.6
million in the third quarter of 1997 from $3.9 million in the third quarter of
1996. The decrease in operating expenses is due primarily to the Company's
closing of its screen print operations in the third quarter of 1996, as part of
a restructuring plan implemented during the 1995 fourth quarter, and to
additional operational streamlining. As a percentage of net sales, operating
expenses decreased to 13.4% in the third quarter of 1997 from 16.9% in the third
quarter of 1996.
Primarily as a result of the decrease in operating expenses, operating
profit increased approximately $1.1 million, or 191.1%, to approximately
$543,000 in the third quarter of 1997 from a loss of $(596,000) in the third
quarter of 1996. As a percentage of net sales, operating profit margin was 2.7%
in the third quarter of 1997, compared to (2.6)% in the third quarter of 1996.
Interest expense decreased approximately $115,000 or 25.1%, to $343,000 in
the third quarter of 1997 from $458,000 in the third quarter of 1996, primarily
due to reduced borrowings under the Company's line of credit, which resulted
from carrying lower accounts receivable and inventory balances, and because the
Company took advantage of deferred datings from major vendors.
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Income before income taxes increased approximately $1.3 million to $200,000
in the third quarter of 1997 from a loss of $(1.1) million in the third quarter
of 1996. Income before income taxes as a percentage of net sales increased to
1.0% in the third quarter of 1997 from (4.6)% in the third quarter of 1996.
As a result of the factors described above, net income increased
approximately $1.2 million to $184,000 in the third quarter of 1997 from a loss
of $(983,000) in the third quarter of 1996. Net income as a percentage of net
sales increased to 0.9% in the third quarter of 1997 from (4.3)% in the third
quarter of 1996.
First Nine Months of 1997 Compared to First Nine Months of 1996
The Company's net sales decreased approximately $20.1 million, or 26.3%, to
$56.3 million in the first nine months of 1997 from $76.4 million in the first
nine months of 1996. The decrease in net sales was primarily attributable to
sluggishness in the industry and to the impact of the Company's 1995
restructuring in which its screen print operations were shut down during the
1996 third quarter.
The Company's gross profit decreased approximately $3.8 million, or 28.3%,
to $9.5 million for the first nine months of 1997 from $13.3 million in the
first nine months of 1996. Gross profit margin decreased to 16.9% in the first
nine months of 1997 from 17.3% in the first nine months of 1996. The decline in
gross profit is attributable to both the decrease in net sales and stiff
competition in the industry. Gross profit margin was further impacted by the
fact that sales of the Company's manufactured products, which have a higher
gross margin, decreased to 20.8% of net sales for the first nine months of 1997
from 25.7% of net sales in the first nine months of 1996.
Operating expenses decreased approximately $4.1 million, or 32.8%, to $8.4
million in the first nine months of 1997 from $12.5 million in the first nine
months of 1996. The decrease in operating expenses is due primarily to the
Company's closing of its screen print operations in the third quarter of 1996,
as part of a restructuring plan implemented during the 1995 fourth quarter, and
to additional operational streamlining. As a percentage of net sales, operating
expenses decreased to 14.9% in the first nine months of 1997 from 16.3% in the
first nine months of 1996.
As a result of the decrease in operating expenses, operating profit
increased approximately $337,000, or 43.9% to $1.1 million in the first nine
months of 1997 from $768,000 in the first nine months of 1996. As a percentage
of net sales, operating profit increased to 2.0% in the first nine months of
1997 from 1.0% in the first nine months of 1996.
Interest expense decreased approximately $382,000, or 23.1%, to $1.3 million
in the first nine months of 1997 from $1.7 million in the first nine months of
1996, primarily due to reduced borrowings under the Company's line of credit,
which resulted from carrying lower accounts receivable and inventory balances,
and because the Company took advantage of deferred datings from major vendors.
Loss before income taxes decreased approximately $719,000 to $(164,000) in
the first nine months of 1997 from $(883,000) in the first nine months of 1996.
Loss before income taxes as a percentage of net sales decreased to (0.3)% in the
first nine months of 1997 from (1.2)% in the first nine months of 1996.
As a result of the factors described above, net loss decreased approximately
$703,000 to $(180,000) in the first nine months of 1997 from $(883,000) in the
first nine months of 1996. Net loss as a percentage of net sales decreased to
(0.3)% in the first nine months of 1997 from (1.2)% in the first nine months of
1996.
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operations was approximately $4.8 million for the first
nine months of 1997 compared to $10.0 million in the first nine months of 1996.
The net cash provided by operations in the first nine months of 1997 was
primarily through the receipt of approximately $2.1 million in income tax
refunds and to an increase in accounts payable that resulted from taking
advantage of deferred datings for early inventory purchases.
In April 1996, the Company entered into a new credit facility (the "new
facility"). This new facility was subsequently amended in November 1996 and
March 1997 to modify certain covenants, waive existing defaults and revise the
maximum borrowing amount and interest rate. The new facility, as amended (i)
provides for maximum borrowings of $20 million (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 1.25%,
and (iv) is secured by principally all the Company's assets. As of October 14,
1997, the Company had borrowings totaling $12.3 million outstanding under the
new facility and availability to borrow $4.1 million.
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<PAGE> 8
The Company has incurred operating losses in each of the last two fiscal
years and the first nine months of 1997. The Company restructured its operations
in 1996 and 1995 and in addition, the Company has entered into new borrowing
arrangements. Management has developed an operating plan with the goal of
improving operations in 1997 and improving results in subsequent years.
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 1997. However, if there is a
significant reduction of internally generated funds or the Company is unable to
meet the operating projections used in amending the credit facility, 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.
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS
Certain statements contained in this filing are "forward-looking statements"
within the meaning of the Private Securities Litigation Reform Act of 1995, such
as statements relating to financial results and plans for future business
development activities, and are thus prospective. Such forward-looking
statements are subject to risks, uncertainties and other factors which could
cause actual results to differ materially from future results expressed or
implied by such forward-looking statements. Potential risks and uncertainties
include, but are not limited to, economic conditions, competition and other
uncertainties detailed from time to time in the Company's Securities and
Exchange Commission filings.
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<PAGE> 9
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
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(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 September 27, 1997.
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<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: October 14, 1997 By: /s/ Isador E. Mitzner
---------------------------
Isador E. Mitzner, Chairman
and Chief Executive Officer
Dated: October 14, 1997 By: /s/ John F. Hankinson
---------------------------
John F. Hankinson
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF LAT SPORTSWEAR FOR THE NINE MONTHS ENDED SEPTEMBER 27,
1997, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-27-1997
<PERIOD-START> DEC-29-1996
<PERIOD-END> SEP-27-1997
<CASH> 338
<SECURITIES> 0
<RECEIVABLES> 9,258
<ALLOWANCES> 1,770
<INVENTORY> 21,903
<CURRENT-ASSETS> 30,701
<PP&E> 7,324
<DEPRECIATION> 3,475
<TOTAL-ASSETS> 34,903
<CURRENT-LIABILITIES> 10,021
<BONDS> 13,515
0
0
<COMMON> 10,825
<OTHER-SE> (24)
<TOTAL-LIABILITY-AND-EQUITY> 34,903
<SALES> 56,297
<TOTAL-REVENUES> 56,297
<CGS> 46,800
<TOTAL-COSTS> 46,800
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 322
<INTEREST-EXPENSE> 1,269
<INCOME-PRETAX> (164)
<INCOME-TAX> 16
<INCOME-CONTINUING> (180)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (180)
<EPS-PRIMARY> (0.04)
<EPS-DILUTED> (0.04)
</TABLE>
