<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:
March 29, 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
-------- --------
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 May 2, 1997
<PAGE> 2
PART I. FINANCIAL INFORMATION
Item 1: Financial Statements
L.A. T SPORTSWEAR, INC.
BALANCE SHEETS
(In thousands except share data)
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<TABLE>
<CAPTION>
March 29, December 28,
1997 1996
ASSETS (unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash $ 371 $ 938
Accounts receivable, net 8,471 7,599
Inventories 24,967 20,561
Income tax receivable 1,913 1,923
Other current assets 1,207 774
---------- -----------
Total current assets 36,929 31,795
PROPERTY, PLANT AND EQUIPMENT - Net 4,134 4,315
OTHER ASSETS 365 409
---------- -----------
$41,428 $36,519
========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 7,254 $ 4,088
Accounts payable - related parties 1,751 1,049
Current portion of long-term debt 23 22
Accrued expenses 1,122 948
---------- -----------
Total current liabilities 10,150 6,107
LONG-TERM DEBT 20,369 18,929
DEFERRED INCOME TAXES 594 502
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 (3,814) (3,148)
---------- -----------
Total stockholders' equity 10,315 10,981
---------- -----------
$41,428 $36,519
========== ===========
</TABLE>
See notes to unaudited financial statements.
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<PAGE> 3
L.A. T SPORTSWEAR, INC.
STATEMENTS OF OPERATIONS (UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
Quarter Ended
--------------------
<S> <C> <C>
March 29, March 30,
1997 1996
NET SALES $16,211 $23,344
COST OF GOODS SOLD 13,420 19,361
-------- --------
Gross Profit 2,791 3,983
OPERATING EXPENSES 3,027 4,056
-------- --------
OPERATING LOSS (236) (73)
INTEREST EXPENSE 430 605
-------- --------
LOSS BEFORE INCOME TAXES (666) (678)
INCOME TAX BENEFIT -- (252)
-------- --------
NET LOSS $ (666) $ (426)
======== ========
NET LOSS PER SHARE $ (0.16) $ (0.10)
======== ========
WEIGHTED AVERAGE SHARES OUTSTANDING 4,200 4,200
- ----------------------------------- ======== ========
</TABLE>
See notes to unaudited financial statements.
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<PAGE> 4
L.A. T SPORTSWEAR, INC.
STATEMENTS OF CASH FLOW (UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
QUARTER ENDED
--------------------
MARCH 29, MARCH 30,
1997 1996
<S> <C> <C>
OPERATING ACTIVITIES:
Net loss $ (666) $ (426)
Adjustments to reconcile net loss to net
cash (used in) provided by operating activities:
Depreciation and amortization 180 217
(Loss) gain on sale or write-off of fixed assets (25) 65
Changes in assets and liabilities providing (using) cash:
Accounts receivable (872) (346)
Inventories (4,406) 2,415
Other assets (287) (998)
Accounts payable 3,868 (219)
Accrued expenses 174 (211)
-------- --------
Net cash (used in) provided by operating activities (2,034) 497
INVESTING ACTIVITIES:
Purchase of property, plant and equipment (11) (106)
Proceeds from sale of assets 38 22
-------- --------
Net cash provided by (used in) investing activities 27 (84)
FINANCING ACTIVITIES:
Borrowings under (repayments of) line of credit, net 1,446 (1,119)
Repayments of long-term borrowings (6) (211)
-------- --------
Net cash provided by (used in) financing activities 1,440 (1,330)
-------- --------
NET CHANGE IN CASH (567) (917)
CASH, BEGINNING OF PERIOD 938 2,784
-------- --------
CASH, END OF PERIOD $ 371 $ 1,867
- ------------------- ======== ========
</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 MARCH 29, 1997 AND MARCH 30, 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. 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 three months ended March 29, 1997 are not necessarily indicative of the
operating results for the full year.
2. INVENTORIES
Inventories consisted of the following (in thousands):
<TABLE>
<CAPTION>
March 29, December 28,
1997 1996
<S> <C> <C>
Raw materials $ 734 $ 771
Work-in-process 377 307
Finished goods 23,856 19,483
------- -------
$24,967 $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 $25 million, which declines to $20 million
(subject to certain collateral restrictions based on eligible receivables,
inventories and fixed assets) after August 1997, (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 May 2, 1997, the Company had
borrowings totaling $18.3 million outstanding under the new facility and
availability to borrow $1.3 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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<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
---------------------
March 29 March 30,
1997 1996
<S> <C> <C>
Net Sales 100.0% 100.0%
Cost of goods sold 82.8 82.9
Gross profit 17.2 17.1
Operating expenses 18.7 17.4
------- --------
Operating loss (1.5) (0.3)
Interest expense (2.6) (2.6)
------- --------
Loss before income taxes (4.1) (2.9)
Income tax benefit -- 1.1
------- --------
Net loss (4.1)% (1.8)%
- -------- ======= ========
</TABLE>
First Quarter of 1997 Compared to First Quarter of 1996
The Company's net sales decreased approximately $7.1 million, or 30.6%,
to $16.2 million in the first quarter of 1997 from $23.3 million in the first
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 $1.2 million,
or 29.9%, to $2.8 million for the first quarter of 1997 from $4.0 million in
the first quarter of 1996. As a percentage of net sales, gross profit margin
increased to 17.2% in the first quarter of 1997 from 17.1% in the first
quarter of 1996. The decline in gross profit is attributable to the decrease
in net sales.
Operating expenses decreased approximately $1.0 million, or 25.4%
to $3.0 million in the first quarter of 1997 from $4.0 million in the first
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 increased to 18.7% in the first quarter of 1997 from 17.4% in the
first quarter of 1996.
As a result of the decrease in net sales, the Company had an operating
loss of approximately $(236,000) in the first quarter of 1997 compared to an
operating loss of $(73,000) in the first quarter of 1996.
Interest expense decreased approximately $175,000, or 28.9%, to $430,000
in the first quarter of 1997 from $605,000 in the first quarter of 1996,
primarily due to reduced borrowings under the Company's line of credit and as a
result of lower accounts receivable and inventories.
As a result, loss before income taxes decreased approximately $12,000 to
$(666,000) in the first quarter of 1997 from $(678,000) in the first quarter of
1996.
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<PAGE> 7
Net loss increased approximately $240,000 to $(666,000) in the first
quarter of 1997 from $(426,000) in the first quarter of 1996. The Company
recognized an income tax benefit in the first quarter of 1996 of $252,000. No
income tax benefit was recognized during the first quarter of 1997.
LIQUIDITY AND CAPITAL RESOURCES
Net cash used in operations was approximately $(2 million) for the first
quarter of 1997 compared to net cash provided by operations of $497,000 in the
first quarter of 1996. The net cash used in operations in the first quarter of
1997 was primarily used to invest in inventories and to support increased
accounts receivable levels. The investment in inventories was in support of a
projected seasonal increase in sales during the 1997 second quarter.
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 $25 million, which declines to $20 million
(subject to certain collateral restrictions based on eligible receivables,
inventories and fixed assets) after August 1997, (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 May 2, 1997, the Company had
borrowings totaling $18.3 million outstanding under the new facility and
availability to borrow $1.3 million.
The Company has incurred operating losses in each of the last two fiscal
years and the first quarter 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.
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<PAGE> 8
PART II. OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
On March 14, 1994, a class action lawsuit was filed by Edward J. Slate,
individually and on behalf of all others similarly situated, in the United
States District Court for the Northern District of Georgia against the Company,
Messrs. Isador Mitzner, David Keller, Jeffrey Lebedin, Nathan Koenigsberg,
David Shelton and The Robinson-Humphrey Company, Inc. The defendants were the
Company, three of its directors (and one former director), one of its then
officers and the managing underwriter of the Company's initial public offering.
The plaintiff purported to represent a class consisting of all persons who
purchased common stock of the Company between January 25, 1994 (the date of the
Company's initial public offering) and March 7, 1994. The suit alleged that
the Company's registration statement and the prospectus for such offering
contained a material omission thereby making those documents materially false
and misleading. The plaintiffs sought an unspecified amount of damages. The
Company, together with all other defendants, filed a Motion to Dismiss the
action, which motion was denied by an Order dated March 29, 1995. In that
Order, the court also granted the plaintiff's Motion for Certification as a
Class Action. The Company and all other defendants filed Motions for
Reconsideration, or in the Alternative, for Decertification of the Class
Action. On May 30, 1995, the Court granted the Motions for Reconsideration.
On May 23, 1995, another lawsuit seeking to proceed as a class action
was filed by Omega Partners, L.P., individually and on behalf of all others
similarly situated, in the same court as the Slate Complaint and against the
same defendants. Omega Partners sought to represent a class consisting of all
persons who purchased common stock of the Company between January 25, 1994 and
March 7, 1994, and also sought to represent a subclass of persons who purchased
common stock of the Company from defendant Robinson-Humphrey or any affiliate
of Robinson-Humphrey as part of the initial public distribution of shares
issued in the offering. The Omega complaint is identical in all other respects
to the Slate complaint.
On August 19, 1996, the Court denied Slate's Motion for Class
Certification. On August 30, 1996, prior to filing any motion for class
certification, Omega Partners voluntarily agreed to dismiss its action against
the Company. On November 22, 1996, the Court denied Slate's Motion for
Reconsideration of its prior order denying class certification. On March 24,
1997, the Company settled the Slate lawsuit.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits.
Exhibit 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 March 29, 1997.
<PAGE> 9
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: May 12, 1997 By: /s/ Isador E. Mitzner
----------------------------------
Isador E. Mitzner, Chairman
and Chief Executive Officer
Dated: May 12, 1997 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 THREE MONTHS, ENDED MARCH 29, 1997
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-27-1997
<PERIOD-START> DEC-29-1996
<PERIOD-END> MAR-29-1997
<CASH> 371
<SECURITIES> 0
<RECEIVABLES> 10,258
<ALLOWANCES> 1,787
<INVENTORY> 24,967
<CURRENT-ASSETS> 36,929
<PP&E> 7,329
<DEPRECIATION> 3,195
<TOTAL-ASSETS> 41,428
<CURRENT-LIABILITIES> 10,150
<BONDS> 20,369
0
0
<COMMON> 10,825
<OTHER-SE> (510)
<TOTAL-LIABILITY-AND-EQUITY> 41,428
<SALES> 16,211
<TOTAL-REVENUES> 16,211
<CGS> 13,420
<TOTAL-COSTS> 13,420
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 138
<INTEREST-EXPENSE> 430
<INCOME-PRETAX> (666)
<INCOME-TAX> 0
<INCOME-CONTINUING> (666)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (666)
<EPS-PRIMARY> (0.16)
<EPS-DILUTED> (0.16)
</TABLE>
