-----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, V4IYwsSWqfEEkyXiEArUC2m7iHpSvAOsAYOdHjinMn+PQHLMDAmUZ6PuAENoQLjE IK6i6ikRiCTu2SFmNB4H3g== 0000950136-96-000577.txt : 19960711 0000950136-96-000577.hdr.sgml : 19960711 ACCESSION NUMBER: 0000950136-96-000577 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960601 FILED AS OF DATE: 19960710 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: DONNKENNY INC CENTRAL INDEX KEY: 0000029693 STANDARD INDUSTRIAL CLASSIFICATION: APPAREL & OTHER FINISHED PRODS OF FABRICS & SIMILAR MATERIAL [2300] IRS NUMBER: 510228891 STATE OF INCORPORATION: DE FISCAL YEAR END: 1204 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-21940 FILM NUMBER: 96592967 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 1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington D.C. 20549 FORM 10-Q [X] QUARTERLY PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 1, 1996 ------------ 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 51-0228891 ------------------------------- --------------- (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.) Indicated by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities and 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 13,996,640 - ---------------------------- ----------------------------- (Class) (Outstanding at June 1, 1996) DONNKENNY, INC. AND SUBSIDIARIES INDEX TO CONSOLIDATED FINANCIAL STATEMENTS (FORM 10-Q) PART I -- FINANCIAL INFORMATION Page Consolidated financial statements: Balance sheet as of June 1, 1996 and December 2, 1995 I-1 Statements of income for the three months ended June 1, 1996 and June 3, 1995 II-1 Statements of cash flows for the six months ended June 1, 1996 and June 3, 1995 III-1 Notes to consolidated financial statements IV-1 Management's Discussion and Analysis of Financial Condition and Results of Operations V-1-2 PART II -- OTHER INFORMATION VI-1 Signatures VI-2 Exhibit Index VII-1 Exhibit 10.33 Exhibit 10.34 Exhibit 27 DONNKENNY, INC. AND SUBSIDIARIES Consolidated Balance Sheets (In Thousands) June 1, 1996 and December 2, 1995
June 1, December 2, 1996 1995 ------- ----------- ASSETS CURRENT: Cash $ 1,298 $ 2,688 Accounts receivable - net of allowances of $2,902 and $3,166 in 1996 and 1995, respectively 49,400 58,783 Recoverable income taxes 200 5,596 Inventories (Note 2) 46,863 43,072 Prepaid expenses and other current assets 1,934 1,464 -------- -------- TOTAL CURRENT ASSETS 99,695 111,603 Property, plant and equipment, net 12,216 12,670 Intangible assets 36,660 37,374 -------- -------- $148,571 $161,647 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT: Current portion of long-term debt $ 6,095 $ 7,092 Accounts payable 12,466 13,178 Accrued expenses and other current liabilities 5,939 13,439 -------- -------- TOTAL CURRENT LIABILITIES 24,500 33,709 Long-term debt, net of current portion 45,463 55,519 Deferred income taxes 4,461 4,059 STOCKHOLDERS' EQUITY: Preferred stock $.01 par value. Authorized 500 shares; issued none Common stock, $.01 par value. Authorized 20,000 shares; issued and outstanding 13,997 and 13,968 shares in 1996 and 1995, respectively 70 70 Additional paid-in capital 46,066 45,813 Retained earnings 28,011 22,477 -------- -------- Total stockholder's equity 74,147 68,360 $148,571 $161,647 ======== ========
See accompanying notes to consolidated financial statements. I-1 DONNKENNY, INC. AND SUBSIDIARIES Consolidated Statements of Income (In Thousands, Except Share and Per Share Data) For the three months and the six months ended June 1, 1996 and June 3, 1995
Three Months Three Months Six Months Six Months Ended Ended Ended Ended 6/1/96 6/3/95 6/1/96 6/3/95 ----------- ------------ ----------- ----------- Net sales $54,996 $40,145 $107,190 $79,257 Cost of sales 39,523 28,473 76,840 56,199 ----------- ----------- ----------- ----------- Gross profit 15,473 11,672 30,350 23,058 Selling, general and administrative expenses 9,126 7,244 18,068 14,191 Amortization of goodwill and other related acquisition costs 368 175 728 375 ----------- ----------- ----------- ----------- Operating income 5,979 4,253 11,554 8,492 Interest expense 1,108 568 2,221 1,239 ----------- ----------- ----------- ----------- Income before income taxes 4,871 3,685 9,333 7,253 Income taxes 1,992 1,510 3,799 2,972 ----------- ----------- ----------- ----------- Net income $ 2,879 $ 2,175 $ 5,534 $ 4,281 =========== =========== =========== =========== Income per common share $.20 $0.16 $0.39 $0.31 =========== =========== =========== =========== Weighted average number of common and common equivalent shares outstanding 14,249,097 13,734,224 14,198,272 13,695,562 =========== =========== =========== ===========
See accompanying notes to consolidated financial statements. II-1 DONNKENNY, INC. AND SUBSIDIARIES Consolidated Statements of Cash Flows (In Thousands) For the six months ended June 1, 1996 and June 3, 1995
June 1, June 3, 1996 1995 ------- ------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income $5,534 $4,281 Adjustments to reconcile net income to net cash provided by operating activities: Increase in deferred income taxes 402 250 Depreciation and amortization of fixed assets 848 547 Amortization of intangibles 728 369 Accretion of debt discount - 6 Provision for losses on accounts receivable (264) 306 Changes in assets and liabilities: Decrease in accounts receivable 9,647 9,623 Decrease in recoverable income taxes 5,396 1,310 Increase in inventories (3,791) (10,693) Increase in prepaid expenses and other current assets (470) (2) Increase in other assets - (107) Decrease in accounts payable (712) (7,413) (Decrease) increase in accrued expenses and other current liabilities (7,514) 899 -------- -------- Net cash provided by (used in) operating activities 9,804 (624) -------- -------- CASH FLOWS FROM INVESTING ACTIVITY: Purchase of fixed assets (394) (412) -------- -------- Net cash used in investing activity (394) (412) CASH FLOWS FROM FINANCING ACTIVITIES: -------- -------- Repayment of long-term debt (3,553) (42) Net (decrease) increase in revolving loan balance (7,500) 625 Exercise of stock options 253 - -------- -------- Net cash (used in) provided by financing activities (10,800) 583 -------- -------- NET DECREASE IN CASH (1,390) (453) -------- -------- CASH, at beginning of year 2,688 1,606 -------- -------- CASH, at end of six months $1,298 $1,153 ======== ========
See accompanying notes to consolidated financial statements. III-1 DONNKENNY, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (In Thousands Except Per Share Data) (Information as of June 1, 1996 and for the six months ended June 1, 1996 and June 3, 1995) NOTE 1 -- BASIS OF FINANCIAL STATEMENTS The financial data are subject to year-end audit and do not purport to be a complete presentation in as much as all disclosures required under generally accepted accounting principles are not included. Reference is made to the Annual Report on Form 10K for the fiscal year ended December 2, 1995. The results of operations for the quarters are not necessarily indicative of those for the full year. In the opinion of management, the accompanying unaudited financial statements are presented on a basis consistent with the audited statements and all adjustments, consisting only of normal recurring adjustments, which are necessary to present fairly the financial position and the results of operations for the periods indicated have been reflected. NOTE 2 -- INVENTORIES Inventories consist of the following: June 1, December 2, 1996 1995 ------- ----------- Raw materials $11,131 $11,071 Work-in-process 5,600 4,783 Finished goods 30,132 27,218 ------- -------- $46,863 $43,072 ======= ======== NOTE 3 -- ACQUISITIONS In June 1995, the Company completed its acquisition of Beldoch Industries Corporation ("Beldoch"). In July 1995, the Company completed the purchase of certain assets of the Sportswear Division of Oak Hill Sportswear Corporation ("Oak Hill"). IV-1 DONNKENNY, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS COMPARISON OF SIX MONTHS ENDED JUNE 1, 1996 AND JUNE 3, 1995 ------------------------------------------------------------ Net sales increased by $27.9 million, or 35.2% from $79.3 million in the first half of fiscal 1995 to $107.2 million in the first half of fiscal 1996. Net sales increased in the Company's sportswear category led by sales from Oak Hill Sportswear and Beldoch Industries acquired during the third quarter of fiscal 1995. Sales of licensed products increased in the Mickey & Co. division, while sales declines were experienced in the sales of intimate apparel and Lewis Frimel products. Gross profit for the first half of fiscal 1996 was $30.4 million or 28.3% of net sales compared to $23.1 million or 29.1% of net sales during the first half of fiscal 1995. The percentage decline was primarily attributable to the lower gross margin percentages attributable to the sales of Beldoch and Oak Hill products. Selling, general and administrative expenses increased from $14.2 million in the first half of fiscal 1995 to $18.1 million in the first half of fiscal 1996. As a percentage of sales, these expenses declined from 17.9% in the first half of fiscal 1995 to 16.9% in the first half of fiscal 1996. The decline in SG&A expenses as a percentage of sales was due primarily to the fact that design and sales expenses increased at a lower rate than the percentage of increase of sales. The amortization of goodwill and other related acquisition costs was $.7 million during the first half of fiscal 1996 compared to $.4 million during the first half of fiscal 1995 as additional goodwill and intangible assets are being amortized due to the Beldoch and Oak Hill acquisitions. Interest expense increased from $1.2 million during the first half of fiscal 1995 to $2.2 million during the first half of fiscal 1996. The increase was the net result of higher average borrowings under the Company's credit facility required to finance the third quarter of fiscal 1995 acquisitions of Beldoch Industries and Oak Hill Sportswear and to finance additional working capital needs. The Company provided for taxes at an effective rate of 40.7% for the first half of fiscal 1996 and 41.0% for the first half of fiscal 1995. COMPARISON OF QUARTERS ENDED JUNE 1, 1996 AND JUNE 3, 1995 ----------------------------------------------------------- Net sales increased by $14.9 million, or 37.2% from $40.1 million in the second quarter of fiscal 1995 to $55.0 million in the second quarter of fiscal 1996. Net sales increased in the Company's sportswear category led by sales from Oak Hill Sportswear and Beldoch Industries acquired during the third quarter of fiscal 1995. Sales of licensed products increased in the Mickey and Co. division, while sales declines were experienced in sales of intimate apparel and Lewis Frimel products. Gross profit for the second quarter of fiscal 1996 was $15.5 million, 28.2% of net sales compared to $11.7 million or 29.2% of net sales during the second quarter of fiscal 1995. The decline was primarily attributable to the lower gross margin percentages attributable to the sales of Beldoch and Oak Hill products. V-1 Selling, general and administrative expenses increased from $7.2 million in the second quarter of fiscal 1995 to $9.1 million in the second quarter of fiscal 1996. As a percentage of sales, these expenses declined from 18.0% in the second quarter of fiscal 1995 to 16.5% in the second quarter of fiscal 1996. The decline in SG&A expenses as a percentage of sales was due primarily to the fact that design and sales expenses increased at a lower rate than the percentage of increase of sales. The amortization of goodwill and other related acquisition costs was $.4 million during the second quarter of fiscal 1996 compared to $.2 million during the second quarter of fiscal 1995 as additional goodwill and intangible assets are being amortized due to the Beldoch and Oak Hill acquisitions. Interest expense increased from $.6 million during the second quarter of fiscal 1995 to $1.1 million during the second quarter of fiscal 1996. The increase was the net result of higher average borrowings under the Company's credit facility required to finance the third quarter of fiscal 1995 acquisitions of Beldoch Industries and Oak Hill Sportswear and to finance additional working capital needs. The Company provided for taxes at an effective rate of 40.9% for the second quarter of fiscal 1996 and 41.0% for the second quarter of fiscal 1995. LIQUIDITY AND CAPITAL RESOURCES - ------------------------------- 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's borrowing requirements for working capital fluctuates throughout the year. Capital expenditures were $.4 million for the first half fiscal 1996 compared to $.4 million in the first half fiscal 1995. The Company may spend up to $3.0 million annually on capital expenditures in accordance with the Chemical Bank Revolving Credit Agreement described below. The Company has no material capital expenditure commitments. Donnkenny Apparel, Inc. and Beldoch Industries Corporation (both wholly- owned subsidiaries of the Company) as borrowers, the Company and the Company's other two subsidiaries as guarantors and Chemical Bank, Bank of New York and Chase Manhattan Bank as lenders are parties to a credit facility entered into in June 1995 in an initial maximum aggregate principal amount of $85 million which was increased to $100 million in May 1996 to provide the Company with the ability to open additional letters of credit (such credit facility as amended to date, the "Chemical Bank Credit Facility"). The Chemical Bank Credit Facility is comprised of a $75 million revolving credit facility and a $25 million term loan facility. The Chemical Bank Credit Facility requires compliance with certain financial performance tests on a quarterly basis that the Company expects to be able to meet. As of June 24, 1996, $17.3 million was available under the revolving credit facility provided under the Chemical Bank Credit Facility. During the first half of fiscal 1996, the Company's operating activities generated cash principally as the result of increases in net income and decreases in accounts receivable and recoverable income taxes, offset by increases in inventory and decreases in accrued expenses, while decreases in accounts payable led to a use in cash from operating activities during the first half of fiscal 1995. The Company believes that amounts available under the revolving credit facility provided under the Chemical Bank Credit Facility will be sufficient to offset any negative operating cash flows and capital expenditures and will provide the Company with sufficient cash for its needs for the foreseeable future. V-2 PART II. OTHER INFORMATION Items 1 - 3. Not applicable Item 4. Submission of matters to vote of security holders. The Company's annual meeting of stockholders was held on April 19, 1996. The following directors were elected: Name For Withholding Authority - ---- --- --------------------- Harvey Appelle 11,322,253 0 James Crystal 11,322,253 0 Sidney Eagle 11,320,853 1,400,000 Harvey Horowitz 11,320,853 1,400,000 Richard Rubin 11,320,851 1,402,000 The appointment of KPMG Peat Marwick as independent auditors for the fiscal year ended November 30, 1996 was ratified with 11,387,751 shares voting in favor, 4,350 shares against and 7,529 shares abstaining. The adoption of the Donnkenny, Inc. Restricted Stock Plan was approved with 5,066,854 shares voting in favor, 2,861,984 shares against, 57,583 abstaining and 5,987,419 broker non-votes. Item 5. Not applicable Item 6. Exhibits and reports on form 8-K. (a) The following documents are filed as part of this report: --------------------------------------------------------- 1. First Amendment Agreement dated as of April 12, 1996 to the Credit Agreement dated as of June 5, 1995 among Donnkenny Apparel, Inc., Beldoch Industries Corporation, the Guarantors Named therein, the Lenders Named therein and Chemical Bank as agent. 2. Second Amendment Agreement dated as of May 13, 1996 to the Credit Agreement dated as of June 5, 1995 among Donnkenny Apparel, Inc., Beldoch Industries Corporation, the Guarantors Named therein, the Lenders Named therein and Chemical Bank as agent. (b) Reports on Form 8-K. -------------------- No reports on Form 8-K were filed by Company during the quarter ended June 1, 1996. VI-1 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. Donnkenny, Inc. --------------------------- Registrant Date: July 10, 1996 /s/ Richard Rubin ------------- --------------------------- Richard Rubin Chairman of the Board, President and Chief Executive Officer Date: July 10, 1996 /s/ Edward T. Creevy ------------- --------------------------- Edward T. Creevy Vice President -- Finance and Chief Financial Officer, (Principal Financial Officer) VI-2 EXHIBIT INDEX Exhibit Description of Sequentially No. Exhibit Numbered Page - ------- ---------------- -------------- 10.33 First Amendment Agreement dated as of April 12, 1996 to the Credit Agreement dated as of June 5, 1995 among Donnkenny Apparel, Inc., Beldoch Industries Corporation the Guarantors Named therein, the Lenders Named therein and Chemical Bank as Agent. 10.34 Second Amendment Agreement dated as of May 13, 1996 to the Credit Agreement dated as of June 5, 1995 among Donnkenny Apparel, Inc., Beldoch Industries Corporation the Guarantors Named therein, the Lenders Named therein and Chemical Bank as Agent. 27 Article 5 Financial Data Schedule VII-1 FIRST AMENDMENT AGREEMENT FIRST AMENDMENT AGREEMENT, dated as of April 12, 1996 to the Credit Agreement, dated as of June 5, 1995 (as the same may be further amended, supplemented or modified from time to time in accordance with its terms, the "Credit Agreement"), among Donnkenny Apparel, Inc., a Delaware corporation and Beldoch Industries Corporation, a Delaware corporation (collectively, the "Borrowers"), the Guarantors named therein and signatures thereto, the lenders named in Schedules 2.01(a) and (b) of the Credit Agreement (collectively, the "Lenders"), and Chemical Bank as agent for the Lenders (in such capacity, the "Agent"). Capitalized terms used herein but not otherwise defined herein shall have the meanings attributed thereto in the Credit Agreement. WHEREAS, the Borrowers have requested, and the Lenders and Agent have agreed to, certain amendments in the Credit Agreement. NOW THEREFORE, for valuable consideration, the receipt and sufficiency of which is hereby acknowledged, and subject to the fulfillment of the conditions set forth below, the parties hereto agree as follows: SECTION 1. AMENDMENTS TO THE CREDIT AGREEMENT 1.1 Sections 7.08 and 7.12 of the Credit Agreement are each hereby amended by removing the period at the end thereof and adding the following: "; provided, however, that in calculating such Ratio there shall be excluded the restructuring charge (not exceeding $8,678,000) taken in the fiscal quarter ended December 2, 1995." 1.2 Section 7.09 of the Credit Agreement is hereby amended in its entirety to read as follows: "SECTION 7.09. Leverage Ratio. Permit the Leverage Ratio of the Parent andd its subsidiaries on a Consolidated basis at the end of any fiscal quarter to be greater than: 3.00:1.00 during the 1996 Fiscal Year; 2.75:1.00 during the 1997 Fiscal Year; and 2.50:1.00 during the 1998 Fiscal Year and thereafter." SECTION 2. CONDITIONS PRECEDENT Upon the execution and delivery of counterparts of this Amendment Agreement (the "Agreement") by the parties listed below and the fulfillment of the following conditions, this Agreement shall be deemed to have become effective as of the date hereof: 2.1 All representations and warranties contained in this Agreement, the Credit Agreement or otherwise made in writing to the Agent or any Lender in connection herewith shall be true and correct in all material respects. 2.2 No unwaived event shall have occurred and be continuing which constitutes a Default or an Event of Default. SECTION 3. MISCELLANEOUS 3.1 Each of the Borrowers reaffirms and restates the representations and warranties set forth in the Credit Agreement, as applicable, and all such representations and warranties shall be true and correct on the date hereof with the same force and effect as if made on such date. 3.2 Except as herein expressly amended, the Credit Agreement and the other documents executed and delivered in connection therewith are each ratified and confirmed in all respects and shall remain in full force and effect in accordance with their respective terms. 3.3 Except as specifically set forth herein, nothing herein contained shall constitute a waiver or be deemed to be a waiver, of any existing Defaults or Events of Default, and the Lenders and Agent reserve all rights and remedies granted to them by the Credit Agreement, the other documents executed and delivered in connection therewith, by law and otherwise. 3.4 This Agreement may be executed by the parties hereto individually or in combination, in one or more counterparts, each of which shall be an original and all of which shall constitute one and the same agreement. A facsimile signature page shall constitute an original for the purposes hereof. 3.5 THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO THE CONFLICTS OF LAWS PRINCIPLES THEREOF. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered by their proper and duly authorized officers as of the day and year first above written. DONKENNY APPAREL, INC. By: /s/ Edward T. Creevy --------------------- Name: Title: VP BELDOCH INDUSTRIES CORPORATION By: /s/ Edward T. Creevy --------------------- Name: Title: VP CHEMICAL BANK, as Agent and Lender By: /s/ Jay T. Linde --------------------- Name: Title: VP THE BANK OF NEW YORK By: /s/ Ronald R. Reedy --------------------- Name: Title: VP THE CHASE MANHATTAN BANK, N.A. By: /s/ Elisabeth Burgess --------------------- Name: Title: VP SECOND AMENDMENT AGREEMENT -------------------------- SECOND AMENDMENT AGREEMENT, dated as of May 13, 1996, to the Credit Agreement, dated as of June 5, 1995 (as the same may be further amended, supplemented or modified from time to time in accordance with its terms, the "Credit Agreement"), among Donnkenny Apparel, Inc., A Delaware corporation and Beldoch Industries Corporation, a Delaware corporation (collectively, the "Borrowers"), the Guarantors named therein and signatures thereto, the lenders named in Schedules 2.01(a) and (b) of the Credit Agrement (collectively, the "Lenders"), and Chemical Bank as agent for the Lenders (in such capacity, the "Agent"). Capitalized terms used herein but not otherwise defined herein shall have the meanings attributed thereto in the Credit Agreement. WHEREAS, the Borrowers have requested, and the Lenders and Agent have agreed to, certain amendments in the Credit Agreement. NOW THEREFORE, for valuable consideration, the receipt and sufficiency of which is hereby acknowledged, and subject to the fulfillment of the conditions set forth below, the parties hereto agree as follows: SECTION 1. AMENDMENTS TO THE CREDIT AGREEMENT 1.1 The Preamble to the Credit Agreement is amended by deleting the first sentence thereof and substituting the following: "The Borrowers have applied to the Lenders for Loans and Letters of Credit (such terms and all other capitalized terms used in this paragraph having the respective meanings ascribed to such terms above or hereinafter) up to an aggregate principal amount of $100,000,000 in the form of (a) a Term Loan to the Borrowers in an aggregate principal amount not in excess of $25,000,000 outstanding and (b) Revolving Credit Loans and Letters of Credit to or for the benefit of the Borrowers at any time and from time to time prior to the Revolving Credit Termination Date in an aggregate principal amount not in excess of $75,000,000 at any time outstanding." 1.2 The defined terms "Availability" and "Required Lenders" contained in Section 1.01 of the Credit Agreement and amended in full to read as follows: " 'Availability' shall mean at any time (i) the lesser at such time of (x) the Total Revolving Credit Commitment less the Letter of Credit Usage, (y) the Borrowing Base and (z) $60,000,000, minus (ii) the unpaid principal balance of, and past due interest and fees on the Revolving Credit Loans. 'Required Lenders' shall mean any two of the Lenders (Chemical Bank and The Chase Manhattan Bank, N.A. being deemed as one Lender so long as they are controlled by one parent) having 51% of the Total Commitment." 1.3 Subparagraph (b) of Section 2.01 of the Credit Agreement is amended in full to read as follows: "(b) Subject to the terms and conditions and relying upon the representations and warranties herein set forth, each Lender, severally and not jointly, agrees to make Revolving Credit Loans to, and through the Agent open Letters of Credit for the benefit of, the Borrowers, at any time and from time to time from the date hereof to the Revolving Credit Termination Date, in an aggregate principal amount at any time outstanding not to exceed the amount of such Lender's Revolving Credit Commitment set forth opposite its name in Schedule 2.01(b) annexed hereto, as such Revolving Credit Commitment may be reduced from time to time in accordance with the provisions of this Agreement. Notwithstanding the foregoing, the aggregate principal amount of Revolving Credit Loans outstanding at any time to the Borrowers shall not exceed the lesser of (A) the Total Revolving Credit Commitment (as such amount may be reduced pursuant to Section 2.07 hereof) minus the Letter of Credit Usage at such time, (B) an amount equal to the sum of (i) up to eighty-five percent (85%) of the Net Amount of Receivables, plus (ii) solely during the two fiscal months ending on the Saturdays closest to the last calendar day of each June and July $7,000,000 (this clause (B) referred to herein as the "Borrowing Base") and (C) $60,000,000 (as such amount may be reduced pursuant to Section 2.07 hereof). The Borrowing Base will be computed monthly and a compliance certificate from a Responsible Officer of the Borrowers presenting its computation will be delivered to the Agent in accordance with Section 6.05 hereof." 1.4 The second sentence of Section 2.04 of the Credit Agreement is amended in full to read as follows: "All Revolving Credit Loans made by a Lender to the Borrowers shall be evidenced by a single Revolving Credit Note, duly executed on behalf of the Borrowers, dated the Closing Date, in substantially the form of Exhibit B annexed hereto, delivered and payable to such Lender in a principal amount equal to such Lender's sublimit for Revolving Credit Loans as set forth on Schedule 2.01(b) annexed hereto." 1.5 Section 2.07(a) of the Credit Agreement is amended by adding thereto the following sentence at the end thereof: "Any reduction in the Total Revolving Credit Commitment to below $60,000,000 shall cause a concurrent reduction in the aggregate sublimit for Revolving Credit Loans ratably among the Lenders in accordance with the amount of their Revolving Credit Commitments." SECTION 2. CONDITIONS PRECEDENT Upon the execution and delivery of conunterparts of this Amendment Agreement (the "Agreement") by the parties listed below and the fulfillment of the following conditions, this Agreement shall be deemed to have become effective as of the date hereof: 2.1 All representations and warranties contained in this Agreement, the Credit Agreement or otherwise made in writing to the Agent or any Lender in connection herewith shall be true and correct in all material respects. 2.2 No unwaived event shall have occurred and be continuing which constitutes a Default or an Event of Default. 2.3 The Agent shall have received for ratable distribution to each of the Lenders an amendment fee of $35,000. SECTION 3. MISCELLANEOUS 3.1 Each of the Borrowers reaffirms and restates the representations and warranties set forth in the Credit Agreement, as applicable, and all such representations and warranties shall be true and correct on the date hereof with the same force and effect as if made on such date. 3.2 Except as herein expressly amended, the Credit Agreement and the other documents executed and delivered in connection therewith are each ratified and confirmed in all respects and shall remain in full force and effect in accordance with their respective terms. 3.3 Except as specifically set forth herein, nothing herein contained shall constitute a waiver or be deemed to be a waiver, of any existing Defaults or Events of Default, and the Lenders and Agent reserve all rights and remedies granted to them by the Credit Agreement, the other documents executed and delivered in connection therewith, by law and otherwise. 3.4 This Agreement may be executed by the parties hereto individually or in combination, in one or more counterparts, each of which shall be an original and all of which shall constitute one and the same agreement. A facsimile signature page shall constitute an original for the purposes hereof. 3.5 THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO THE CONFLICTS OF LAWS PRINCIPLES THEREOF. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered by their proper and duly authorized officers as of the day and year first above written. DONNKENNY APPAREL, INC. By: /s/ Edward T. Creevy --------------------- Name: Title: BELDDOCH INDUSTRIES CORPORATION By: /s/ Edward T. Creevy --------------------- Name: Title: VP CHEMICAL BANK, as Agent and Lender By: /s/ Jay T. Linde --------------------- Name: Title: VP THE BANK OF NEW YORK By: /s/ Russell Burr --------------------- Name: Title: SVP THE CHASE MANHATTAN BANK, N.A. By: /s/ Joseph F. Abruzzo --------------------- Name: Title: VP SCHEDULE 2.01(b) Revolving Credit Commitments ---------------------------- Approximate Revolving Percentage of Credit Total Revolving Lender Commitment Credit Commitment ------ ------------ ----------------- Chemical Bank $30,882,300 41.1764% 111 West 40th Street 10th Floor New York, New York 10018 Attn: Jay T. Linde The Bank of New York $22,058,850 29.4118% 530 Fifth Avenue 3rd Floor New York, NY 10036 Attn: Ronald Pagota The Chase Manhattan Bank, N.A. $22,058,850 29.4118% 111 West 40th Street 10th Floor New York, NY 10018 Attn: Joseph F. Abruzzo Sublimit for Revolving Credit Loans ----------------------------------- Approximate Lender Sublimit Percentage - ------ -------- ---------- Chemical Bank $24,705,840.00 41.1764% The Bank of $17,647,080.00 29.4118% New York The Chase Manhattan $17,647,080.00 29.4118% 6 EX-27 2 ARTICLE 5 FINANCIAL DATA SCHEDULE
5 Donnkenny, Inc. Financial Data Schedule Article 5 of Regulation S-X This schedule contains summary financial information extracted from the Donnkenny, Inc. Second Quarter Form 10-Q and is qualified in its entirety by reference to such financial statements. 6-MOS NOV-30-1996 JUN-1-1996 1,298,000 0 52,302,000 2,902,000 46,863,000 99,695,000 23,924,000 11,708,000 148,571,000 24,500,000 0 70,000 0 0 46,066,000 148,571,000 107,190,000 0 76,840,000 76,840,000 0 0 2,221,000 9,333,000 3,799,000 9,333,000 0 0 0 5,534,000 (0.39) (0.39)
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