-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, H/WdEoasyM22vorxkYnWGRpyRYbCn1yLwHMCquQAf4Uxb4W6aFpHYPA9HgXufkgR b/jIIsNYFxqAWu76lemEOA== 0000950136-97-000723.txt : 19970613 0000950136-97-000723.hdr.sgml : 19970613 ACCESSION NUMBER: 0000950136-97-000723 CONFORMED SUBMISSION TYPE: 10-Q/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19950304 FILED AS OF DATE: 19970612 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: DONNKENNY INC CENTRAL INDEX KEY: 0000029693 STANDARD INDUSTRIAL CLASSIFICATION: WOMEN'S, MISSES', AND JUNIORS OUTERWEAR [2330] IRS NUMBER: 510228891 STATE OF INCORPORATION: DE FISCAL YEAR END: 1204 FILING VALUES: FORM TYPE: 10-Q/A SEC ACT: 1934 Act SEC FILE NUMBER: 000-21940 FILM NUMBER: 97623054 BUSINESS ADDRESS: STREET 1: 1411 BROADWAY CITY: NEW YORK STATE: NY ZIP: 10018 BUSINESS PHONE: 5402286181 MAIL ADDRESS: STREET 1: 1411 BROADWAY CITY: NEW YORK STATE: NY ZIP: 10018 10-Q/A 1 AMENDED FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-QA [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 4, 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 0-21940 ------- Donnkenny, Inc. ------------------------------------------------------ (Exact name of registrant as specified in its charter) Delaware 51-022889 ------------------------------- ---------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 1411 Broadway, New York, NY 10018 ---------------------------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (212) 730-7770 -------------- 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), Yes _X_ No ___ 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 issuer's classes of Common Stock, as of the latest practicable date. Common Stock $0.01 par value 13,645,640 (as revised for spilt) ---------------------------- --------------------------------- (Class) (Outstanding at March 4, 1995) DONNKENNY, INC. AND SUBSIDIARIES INDEX TO CONSOLIDATED FINANCIAL STATEMENTS (FORM 10-QA)
Page ---- PART I - FINANCIAL INFORMATION Consolidated financial statements: Balance sheets as of March 4, 1995 (unaudited) and December 3, 1994 ............ I-1 Statements of operations for the three months ended March 4, 1995 and March 5, 1994 (unaudited) .................................... II-1 Statements of cash flows for the three months ended March 4, 1995 and March 5, 1994 (unaudited) .................................... III-1 Notes to consolidated financial statements...................................... IV-1 Management's Discussion and Analysis of Financial Condition and Results of Operations .......................................................... V-1 PART II - OTHER INFORMATION ............................................................ VI-1 Signatures ..................................................................... VI-2
DONNKENNY, INC. AND SUBSIDIARIES Consolidated Balance Sheets (In Thousands) March 4, 1995 and December 3, 1994
March 4, December 3, 1995 1994 ----------- ---------- (Restated unaudited) (Restated) ASSETS CURRENT: Cash $ 1,590 $ 1,606 Accounts receivable - net of allowances of $797 and $881 in 1995 and 1994, respectively 18,635 34,349 Recoverable income taxes 2,454 2,308 Inventories (Note 2) 46,563 34,458 Deferred tax assets 1,330 1,330 Prepaid expenses and other current assets 1,460 1,260 -------- -------- TOTAL CURRENT ASSETS 72,032 75,311 Property, plant and equipment, net 9,576 9,552 Intangible assets 24,122 24,316 -------- -------- Total Assets $105,730 $109,179 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT: Current portion of long-term debt $ 87 $ 85 Accounts payable 13,725 16,959 Accrued expenses and other current liabilities 3,810 3,975 -------- -------- TOTAL CURRENT LIABILITIES 17,622 21,019 Long-term debt, net of current portion 28,332 28,230 Deferred income taxes 2,104 2,104 STOCKHOLDERS' EQUITY: Common stock, $.01 par value. Authorized 20,000 shares; issued and outstanding 13,644 and 13,644 shares in 1995 and 1994, respectively 137 137 Additional paid-in capital 43,585 43,585 Retained earnings 13,950 14,104 -------- -------- Total stockholders' equity 57,672 57,826 Total Liabilities and Stockholders' Equity $105,730 $109,179 ======== ========
See accompanying notes to consolidated financial statements. I - 1 DONNKENNY, INC. AND SUBSIDIARIES Consolidated Statements of Operations (In Thousands, Except Share and Per Share Data) (Unaudited)
Three Months Ended ---------------------------- 3/4/95 3/5/94 ------------ ------------ (Restated) (Restated) Net sales $ 24,702 $ 26,886 Cost of sales 18,330 18,237 ------------ ------------ Gross profit 6,372 8,649 Selling, general and administrative expenses 5,747 5,657 Amortization of goodwill and other related acquisition costs 201 305 Gain on sale of license (note 4) -- 1,116 ------------ ------------ Operating income 424 3,803 Interest expense 671 770 ------------ ------------ (Loss) income before income taxes (247) 3,033 Income tax (benefit) provision (93) 1,222 ------------ ------------ Net (loss) income $ (154) $ 1,811 ============ ============ (Loss) income per common share $ (0.01) $ 0.14 ============ ============ Weighted average number of common shares outstanding and common stock equivalents 13,645,640 12,617,314 ============ ============
See accompanying notes to consolidated financial statements. II - 1 DONNKENNY, INC. AND SUBSIDIARIES Consolidated Statements of Cash Flows (In Thousands) (Unaudited)
THREE MONTHS ENDED ----------------------- March 4, March 5, 1995 1994 ----------- ---------- (Restated) (Restated) CASH FLOWS FROM OPERATING ACTIVITIES: Net (loss) income $ (154) $ 1,811 Adjustments to reconcile net (loss) income to net cash provided by operating activities: Depreciation and amortization of fixed assets 272 249 Amortization of intangibles 201 305 Accretion of debt discount 6 8 Provision for losses on accounts receivable 420 240 Changes in assets and liabilities: Decrease in accounts receivable 15,294 8,520 Increase in recoverable income taxes (146) (236) Increase in inventories (12,105) (4,146) (Increase) decrease in prepaid expenses and other current assets (207) 774 Increase in other assets -- (9) Decrease in accounts payable (3,234) (804) Decrease in accrued expenses and other current liabilities (165) (750) Increase in income taxes payable -- 957 -------- -------- Net cash provided by operating activities 182 6,919 -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of fixed assets (296) (73) -------- -------- Net cash used in investing activities (296) (73) -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES: Repayment of long-term debt (12,402) (644) Long-term debt borrowings 12,500 -- Net repayments under revolving credit line -- (8,000) Net borrowings under revolving credit line -- 2,000 -------- -------- Net cash provided by (used in) financing activities 98 (6,644) -------- -------- NET (DECREASE) INCREASE IN CASH (16) 202 CASH, AT BEGINNING OF YEAR 1,606 927 -------- -------- CASH, AT END OF QUARTER $ 1,590 $ 1,129 ======== ========
See accompanying notes to consolidated financial statements. III - 1 DONNKENNY, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (In Thousands Except Per Share Data) NOTE 1 - BASIS OF PRESENTATION The accompanying unaudited consolidated financial statements have been prepared by the Company pursuant to the Rules of the Securities and Exchange Commission ("SEC") and in the opinion of management, include all adjustments, (consisting of normal recurring accruals) necessary for the fair presentation of financial position, results of operations and cash flows. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such SEC rules. The Company believes the disclosures made are adequate to make such financial statements not misleading. The results for the interim periods presented are not necessarily indicative of the results to be expected for the full year. These financial statements should be read in conjunction with the Company's December 31, 1996 Form 10-K which includes restated financial information for the 1994 and 1995 fiscal years. Balance sheet data as of December 3, 1994 has been derived from audited financial statements of the Company. NOTE 2 - INVENTORIES Inventories consist of the following: March 4, December 3, 1995 1994 ---- ---- (Restated see Note 1) Raw materials $11,445 $ 8,320 Work-in-process 4,628 4,314 Finished goods 30,490 21,824 ------- ------- $46,563 $34,458 ======= ======= NOTE 3 - PUBLIC OFFERING On May 5, 1994, the Company completed a public offering of 5,060,000 shares of common stock of which 1,177,640 shares were sold by the Company and 3,882,360 shares were sold by certain stockholders. The price per share in the offering of $10.31 resulted in net proceeds of $10,885 to the Company. The net proceeds were used to repay $10,600 of indebtedness, accrued interest and a prepayment penalty of $495. NOTE 4 - GAIN ON SALE OF LICENSE The Company sold the rights to the Ship 'N Shore trademarks in December, 1993 resulting in a one time pre-tax gain of $1,116 that equates to $0.05 per share on an after-tax basis during the first quarter of fiscal 1994. IV-1 NOTE 5 - STOCK SPLIT On November 17, 1995 , the Board of Directors authorized a two-for-one stock split which was paid to all holders of record on December 4, 1995. All references in the accompanying consolidated financial statements to number of shares, per share amounts, and prices of the Company's common stock for periods prior to December 4, 1995 have been restated to reflect the stock split. NOTE 6 - RESTATEMENT OF FINANCIAL INFORMATION The Company has restated its financial statements for the years ended December 2, 1995 and December 3, 1994, as well as the quarters within such years and the two quarters of fiscal 1996 because of errors discovered for those periods subsequent to the issuance of such financial statements. The financial statements for the aforementioned periods required restatement to correct the reporting for the recognition of net sales, cost of sales and certain expenses. The third quarter of fiscal 1996 was restated for the rescission of the Fashion Avenue acquisition and to reflect additional reserves for sales returns and allowances. The impact of the restatement on the Company's statement of operations and balance sheets is summarized as follows: 3 MONTHS ENDED March 4, 1995 March 5, 1994 - -------------- ---------------------- ------------------------ (As Originally (As Originally STATEMENT OF OPERATIONS Reported) (Restated) Reported) (Restated) - ----------------------- --------- ---------- ---------- ---------- Net Sales .................... $ 39,112 $ 24,702 $ 30,560 $ 26,886 Gross Profit ................. 11,386 6,372 9,215 8,649 Operating Income ............. 4,238 424 4,369 3,803 Net Income (Loss) ............ 2,105 (154) 2,141 1,811 Per common share: Net Income (Loss) .... $ 0.15 ($ 0.01) $ 0.17 $ 0.14 March 4, 1995 December 3, 1994 ---------------------- ------------------------ (As Originally (As Originally BALANCE SHEET Reported) (Restated) Reported) (Restated) - -------------- --------- ---------- ---------- ---------- Current Assets ............. $ 76,863 $ 72,032 $ 77,758 $ 75,311 Total Assets ............... 110,561 105,730 111,626 109,179 Total Liabilities .......... 48,020 48,058 51,190 51,353 Stockholders' Equity ....... 62,541 57,672 60,436 57,826 IV - 2 DONNKENNY, INC AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS COMPARISON OF QUARTERS ENDED MARCH 4, 1995 AND MARCH 5, 1994 Net sales decreased by $2.2 million from $26.9 million in the first quarter of fiscal 1994 to $24.7 million in the first quarter of fiscal 1995. Net sales increases in the Mickey & Co. product line and intimate apparel sales of the Company's licensed products, which began shipping during the first quarter of fiscal 1994 were more than offset by declines in the Donnkenny and Lewis Frimel divisions. Gross profit for the first quarter of fiscal 1995 was $6.4 million or 25.8% of net sales compared to $8.6 million or 32.2% of net sales during the first quarter of fiscal 1994. The decline was primarily due to the lower gross margin percentages attributable to the sales of intimate apparel. Selling, general and administrative expenses were unchanged at $5.7 million in the first quarter of fiscal 1994 versus $5.7 million in the first quarter of fiscal 1995. As a percentage of net sales, these expenses increased from 21.0% in the first quarter of fiscal 1994 to 23.3% in the first quarter of fiscal 1995. The increase in SG&A expenses as a percentage of net sales was due to fixed expenses related to the decline in net sales. The amortization of goodwill and other related acquisition costs were $0.2 million during the first quarter of fiscal 1995 compared to $0.3 million during the first quarter of fiscal 1994 as certain related acquisition costs became fully amortized during February, 1995. The Company sold the rights to the Ship 'N Shore trademarks during the first quarter of fiscal 1994 resulting in a one-time pre-tax gain of $1.1 million that equated to $0.05 per share on an after tax basis. There was no corresponding gain during fiscal 1995. Interest expense declined from $0.8 million during the first quarter of fiscal 1994 to $0.7 million during the first quarter of fiscal 1995 due to reduced borrowings under the Company's Senior Term Loan with the Prudential Insurance Company at America, Pruco Life Insurance and Prudential Reinsurance Company (the "Prudential Senior Term Loan") which was paid off on February 2, 1995, offset to a certain extent by higher average borrowings on the Company's line of credit to support higher working capital needs. The Company provided for taxes at an effective rate of 37.7% for the first quarter of fiscal 1995 and 40.3% for the first quarter of fiscal 1994 LIQUIDITY AND CAPITAL RESOUSES The Company's liquidity requirements arise from the funding of working capital needs, primarily inventory and accounts receivable, and the interest and principal payments related to certain indebtedness. The Company utilized the net proceeds from its second public offering, which closed on May 5, 1994, to repay $10.6 million of debt, accrued interest and a prepayment penalty owing pursuant to the Prudential Senior Term Loan. This payment reduced interest expense, which was partially offset by increased average borrowings on the Company's line of credit to support higher working capital needs. The Company's borrowing requirements for working capital fluctuate throughout the year. Capital expenditures were $0.3 million for the first quarter fiscal 1995 compared to $0.l million in the first quarter fiscal 1994. The Company may spend up to $2.0 million annually on capital investments in accordance with the new Chemical Bank Revolving Credit agreement described below. The Company has no material capital expenditure commitments. During the first quarter of fiscal 1995, the Company's operating activities generated cash principally as the result of decreases in accounts receivable which was partially offset by increases in inventory. During the first quarters of fiscal 1994, the Company's operating activities generated cash principally as the result of net income and decreases in accounts receivable, which was partially offset by increases in inventory. The Company believes that amounts available under the new $35.0 million Chemical Bank revolving credit agreement will be sufficient to offset any negative operating cash flows and capital expenditures, and to provide the Company with sufficient cash for its needs for the foreseeable future. V-1 On February 2, 1995, the Company entered into a new three year, $35.0 million secured revolving credit facility from Chemical Bank which replaced a $25.0 million secured line of credit facility with Chemical Bank. On February 2, 1995, the Company drew down on the new Chemical bank revolving credit facility to make a final principal payment of $12.4 million to retire the prudential Senior Term Loan. The new Chemical Loan facility requires compliance with certain financial performance tests on a quarterly basis that the Company expects to be able to meet. As of April 3, 1995, $9.0 million was available under the Chemical Bank line of credit facility. V-2 DONNKENNY, INC. AND SUBSIDIARIES PART II. OTHER INFORMATION Item 1. Legal Proceedings. Not applicable. Item 2. Changes in Securities. Not applicable. Item 3. Defaults Upon Senior Securities. Not applicable. Item 4. Submission of Matters to a Vote of Security Holders. Not applicable. Item 5. Other Information. Not applicable. Item 6. Exhibits and Reports on Form 8-K. (a) Exhibits. None. (b) Reports on Form 8-K. None. VI - 1 S I G N A T U R E S 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. DONNKENNY, INC. ------------------------------ Registrant Date: June 11, 1997 -------------------- ------------------------------ Harvey Appelle Chairman of the Board Chief Executive Officer Date: June 11, 1997 -------------------- ------------------------------ Stuart. S. Levy Vice President - Finance and Chief Financial Officer, (Principal Financial Officer) VI - 2 -----END PRIVACY-ENHANCED MESSAGE-----