SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-Q/A
(AMENDMENT NO. 1)
(Mark One)
X__ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 2, 1996
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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 0-23632
SCOTT MILLS, INC.
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(Exact name of registrant as specified in its charter)
Pennsylvania 23-2736759
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
120 West Germantown Pike, Suite 100
Plymouth Meeting, Pennsylvania 19462
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
(610) 828-7261
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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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APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares outstanding
of each of the issuer's classes of common stock, as of the latest practicable
date:
Class Outstanding at August 26, 1996
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Common Stock 3,367,598
Par Value $1.00 per share
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Part I, Item 2 of the Registrant's Quarterly Report on Form 10-Q for the
fiscal quarter ended March 2, 1996 is hereby amended and restated in its
entirety as follows:
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
Results of Operations
Sales
Fabric sales occur when the Company sells piece goods it manufactures
and owns; therefore, it includes the price of raw material, typically yarn or
greige goods. Commission sales occur when the Company processes yarn or piece
goods owned by others which typically requires less working capital.
The following table presents, for the periods indicated, the Company's
net sales by category.
Three Months Ended
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($000's)
Mar. 2, Mar. 4,
1996 1995
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Fabric $1,648 $3,852
Commission 15 915
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$1,663 $4,767
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Net sales decreased 65% or $3,104,000 in the first quarter of fiscal
year 1996 compared to the first quarter of fiscal year 1995. The Company
significantly decreased its fabric and commission sales as a result of closing
its dyehouse in September 1995. Kleinert's, Inc. accounted for 92% of the net
sales in the first quarter of 1996. The Company believes Kleinert's will
continue as a major customer although the Company is in the midst of hiring a
sales executive to market the Company's products to other children's apparel
customers.
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Gross Profit (Loss)
The following table presents for the periods indicated, the Company's
gross profit in dollars and gross profit as a percentage of net sales (gross
margin).
Three Months Ended
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($000's)
Mar. 2, Mar. 4,
1996 1995
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Gross Profit $134 $385
% of Net Sales 8.1% 8.1%
Gross margins remained constant at 8.1% in the first quarter of 1996
when compared to the same quarter in 1995. The manufacturing operation in the
first quarter of 1996 contained only the knitting department as compared to
knitting, dyeing and finishing in 1995. The Company has dramatically reduced its
operating costs due to subcontracting its dyeing and finishing. This has
permitted the Company to produce less pounds yet still operate profitably.
Scott Mills has relatively few customers due principally to the
consequences of the delivery and quality problems which occurred when Scott
Mills was engaged in the dyeing and finishing business. However, there continues
to be a market for a good primary and secondary source of acrylic, 100%
polyester and polycotton fabrics in the children's sleepwear and activewear
markets. Scott Mills is in the midst of hiring a new sales executive and has
begun to aggressively pursue these markets.
Selling and Administrative Expenses
The Company incurred no selling or administrative expenses in the first
quarter of 1996. All corporate expenses are included in cost of goods sold. The
Company is in the midst of hiring a sales executive to increase non-affiliate
sales to the children's apparel market.
Interest Expense
Interest expense decreased 49% to $76,000 in the first quarter of 1996
when compared to the first quarter of 1995 due to the Company selling its
dyehouse assets and significantly reducing its capital lease obligations and
paying off its term debt in November 1995.
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Taxes
No income tax provision is reflected in the first quarter of 1996 due
to the availability of tax loss carryforwards. No income tax benefit was
reflected in the first quarter of 1995 since the realization of such benefit
could not be reasonably assured.
Liquidity and Capital Resources
The Company reported net income of $61,000 in the first quarter of 1996 as
a result of its new strategy to subcontract its dyeing and finishing business
with several unaffiliated vendors, including Dyersburg Fabrics, Inc., the
unaffiliated entity to whom the Company's dyeing and finishing assets were sold.
The terms of each commission dyer and finisher is on an order-to-order basis.
The Company is working vigorously to reduce operating expenses and shift fixed
costs into variable costs so the Company will not need to manufacture just to
absorb overhead. This strategy should conserve working capital. The Company is
negotiating with all of its creditors to pay off its liabilities in an orderly
fashion. The Company will continue to require the working capital loan provided
by Kleinert's, Inc. in the foreseeable future. The Company is pursuing all
avenues of financing in order to ensure it can meet its financial obligations;
however, there can be no assurance that sufficient liquidity will exist to
enable the Company to continue as a going concern.
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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 thereunder duly authorized.
SCOTT MILLS, INC.
Date: August 26, 1996 By: /s/ Edwin Gowan
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Edwin Gowan
Chief Financial Officer
