-----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, GICL/kkHkba6Uz5l3IkXVnTM4rw8V5OaxN5wZg/dRky1dAcxlzSTZ1wrC9okMCzi ZedrrG17OHBJcusb8UNqUw== 0000903893-97-000079.txt : 19970123 0000903893-97-000079.hdr.sgml : 19970123 ACCESSION NUMBER: 0000903893-97-000079 CONFORMED SUBMISSION TYPE: 10-Q/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19960601 FILED AS OF DATE: 19970122 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: NANTUCKET INDUSTRIES INC CENTRAL INDEX KEY: 0000069623 STANDARD INDUSTRIAL CLASSIFICATION: MEN'S & BOYS' FURNISHINGS, WORK CLOTHING, AND ALLIED GARMENTS [2320] IRS NUMBER: 580962699 STATE OF INCORPORATION: DE FISCAL YEAR END: 0225 FILING VALUES: FORM TYPE: 10-Q/A SEC ACT: 1934 Act SEC FILE NUMBER: 001-08509 FILM NUMBER: 97508889 BUSINESS ADDRESS: STREET 1: 105 MADISON AVE CITY: NEW YORK STATE: NY ZIP: 10016 BUSINESS PHONE: 212-889-5656 MAIL ADDRESS: STREET 1: 105 MADISON AVENUE CITY: NEW YORK STATE: NY ZIP: 10016 FORMER COMPANY: FORMER CONFORMED NAME: NANTUCKET LINGERIE INC DATE OF NAME CHANGE: 19690715 10-Q/A 1 AMENDED FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q/A AMENDMENT TO REPORT Filed pursuant to Section 12, 13,or 15(d) of THE SECURITIES EXCHANGE ACT OF 1934 NANTUCKET INDUSTRIES, INC. AMENDMENT NO. 1 The undersigned registrant hereby amends the following items, financial statements, exhibits or other portions of its Annual Report on Form 10-Q for the Quarterly Period ended June 1, 1996, reflecting the complete amended items as set forth in the pages attached hereto: Notes to Consolidated Financial Statements. Management's Discussion and Analysis of Financial Condition and Results of Operations. Pursuant to the requirements of Section 13 or 15(d) 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. NANTUCKET INDUSTRIES, INC. January 20, 1997 By: \s\ Ronald S. Hoffman ---------------------- Ronald S. Hoffman, Vice President-Finance and Chief Financial Officer(principal financial and accounting officer) NANTUCKET INDUSTRIES, INC. -------------------------- AND SUBSIDIARIES ---------------- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ------------------------------------------ THIRTEEN WEEKS ENDED JUNE 1, 1996 AND MAY 27, 1995 -------------------------------------------------- (unaudited) 1. CONSOLIDATED FINANCIAL STATEMENTS The consolidated balance sheet as of June 1, 1996 and the consolidated statements of operations and statements of cash flows for the thirteen weeks ended June 1, 1996 and May 27, 1995 have been prepared by the Company without audit. In the opinion of management, all adjustments necessary for a fair presentation of the financial position of the Company and its subsidiaries at June 1, 1996 and the results of their operations and cash flows for the thirteen weeks ended June 1, 1996 and May 27, 1995 have been made on a consistent basis. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. It is suggested that these consolidated financial statements be read in conjunction with the consolidated financial statements and notes thereto included in the Company's 1996 Annual Report on Form 10-K. The results of operations for the periods presented are not necessarily indicative of the operating results for the full year. 2. INVENTORIES Inventories are summarized as follows: June 1, May 27, 1996 1995 ------------ ------------ Raw materials $ 1,252,006 $ 1,812,761 Work in process 3,993,808 5,449,009 Finished goods 3,961,874 3,464,625 ------------ ------------ $9,207,688 $10,726,395 ------------ ------------ 6 NANTUCKET INDUSTRIES, INC. -------------------------- AND SUBSIDIARIES ---------------- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ------------------------------------------ THIRTEEN WEEKS ENDED JUNE 1, 1996 AND MAY 27, 1995 -------------------------------------------------- (continued) (unaudited) 3. INCOME TAXES At June 1, 1996 the Company had a net deferred tax asset in excess of $5,500,000 which is fully reserved until it can be utilized to offset deferred tax liabilities or realized against taxable income. The Company had a net operating loss carryforward for book and tax purposes of approximately $12,000,000. Accordingly, no provision for income taxes has been reflected in the accompanying financial statements. Certain tax regulations relating to the change in ownership may limit the Company's ability to utilize it's net operating loss carryforward if the ownership change, as computed under such regulations, exceeds 50%. Through June 1, 1996 the change in ownership was approximately 40%. 4. STOCKHOLDERS' EQUITY On March 22, 1994, the Company sold to its Management Group 5,000 shares of non-voting convertible preferred stock for $1,000,000. These shares are convertible into 200,000 shares of common stock at the rate of $5.00 per share. These shares provide for cumulative dividends at a floating rate equal to the prime rate and approximate $180,000 at June 1, 1996. Such dividends are convertible into common stock at the rate of $5.00 per share. These preferred shares are redeemable, at the option of the Company, on or after February 28, 1999 and have a liquidation preference of $200 per share. In connection with the Company's refinancing on March 22, 1994, the Company entered into a $2,000,000 Term Loan Agreement with Chemical Bank. Pursuant to the agreement, the Company issued to Chemical Bank 10,000 treasury common shares, 7,500 in the fiscal year ended March 2, 1996 and 2,500 in the fiscal year ended February 25, 1995, related to its decision to defer making mandatory prepayments. 5. UNUSUAL CHARGE In March, 1994, the Company terminated the employment contracts of its Chairman and Vice Chairman. In accordance with the underlying agreement, they will be paid an aggregate of approximately $400,000 per year in severance, as well as certain other benefits, through February 28, 1999. The present value of these payments, $1,915,000, was accrued at February 26, 1994. Through June 1, 1996 $872,000 of this accrual has been paid; $770,000 through March 2, 1996 and $102,000 in the current fiscal year through June 1, 1996. 7 NANTUCKET INDUSTRIES, INC. -------------------------- AND SUBSIDIARIES ---------------- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ------------------------------------------ THIRTEEN WEEKS ENDED JUNE 1, 1996 AND MAY 27, 1995 -------------------------------------------------- (continued) (unaudited) 6. CREDIT AGREEMENT AMENDMENT As of May 31, 1996, the Company amended its Loan and Security Agreement with Congress Financial Corporation dated March 21, 1994. This amendment provided (a) $251,000 in additional equipment term loan financing, (b) extension of the repayment period for all outstanding equipment term loans, (c) supplemental revolving loan availability from March 1st through June 30th of each year and (d) extension of the agreement through March 20, 1998, renewal date to March 20, 1998. 7. PRIVATE PLACEMENT In April 1996 the Company signed a letter of intent for a $3.5 million private placement consisting of 250,000 shares of common stock and $2,625,000 of 12.5% convertible subordinated debentures due August 31, 1996. The debentures would be secured by a second mortgage on the Company's manufacturing and distribution facility in Georgia and are convertible into 467,167 shares of common stock in specified amounts after specified dates at prices ranging from $5.10 to $6.00. On June 25, 1996 the Company discontinued negotiations and commenced discussions with a new investor group. Upon completion of this transaction, the net proceeds will be used to prepay the balance payable to Chemical Bank. Accordingly, the entire balance is included in current liabilities. The remaining net proceeds will be used to reduce the outstanding balance with Congress. 8. LITIGATION In September 1993, the Company filed an action against the former owners of Phoenix Associates, Inc. ("Phoenix"). The Company is seeking compensatory damages of approximately $4,000,000 plus declaratory and injunctive relief for acts of alleged securities fraud, fraudulent conveyances, breach of fiduciary trust and unfair competition in connection with the acquisition of the common stock of Phoenix. Additionally, the Company has filed a demand for arbitration which seeks compensatory damages of $4,000,000, rescission of the stock purchase agreement, rescission of an employment agreement and other mater, all on account of alleged breaches of the stock purchase agreement, fraudulent misrepresentation and breach of fiduciary duties. 8 NANTUCKET INDUSTRIES, INC. -------------------------- AND SUBSIDIARIES ---------------- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ------------------------------------------ THIRTEEN WEEKS ENDED JUNE 1, 1996 AND MAY 27, 1995 -------------------------------------------------- (continued) (unaudited) In November 1993, the former owners of Phoenix filed counterclaims against the Company alleging improper termination with regard to their employment agreement and breach of the stock purchase agreement. The former owners have filed for damages of approximately $9,000,000. The actions remain in their preliminary stage. The Company considers the damages in the claim to be insupportable and believes it will likely prevail on its defenses to such counterclaims. In the third quarter of the 1996 fiscal year, the Company concluded that its counterclaims against the holder of the subordinated note payable to the former owner of Phoenix, are in excess of the $300,000 due and, in the opinion of legal counsel and management, the likelihood of any payment of this note is remote. The Company is subject to other legal proceedings and claims which arise in the ordinary course of its business. In the opinion of management, the Phoenix litigation and other legal proceedings and claims will be successfully defended or resolved without a material adverse effect on the consolidated financial position or results of operation to the Company. No provision has been made by the Company with respect to the aforementioned litigation at June 1, 1996. 9 NANTUCKET INDUSTRIES, INC. -------------------------- AND SUBSIDIARIES ---------------- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL ------------------------------------------------- CONDITION AND RESULTS OF OPERATIONS ----------------------------------- RESULTS OF OPERATION - -------------------- Sales Net sales for the three months ended June 1, 1996 decreased 36% from prior year levels to $6,688,000. This decline reflects the planned inventory reductions by the Company's major customer in anticipation of the second fiscal quarter introduction of Brittania by Levi's with initial shipments of significant orders expected at the end of July, 1996. Sales of GUESS? products increased 34% over prior year levels as retailers made available space for introductions of the new GUESS? Essentials line which began selling at retail in June, 1996. Gross Margin Gross profit margins decreased from prior year levels of 25% to 15%. This decline is a result of increased manufacturing variances associated with additional processing costs of imported garments coupled with lower margins on close-out sales in the GUESS? division during the first quarter. Losses associated with these sales were reserved for in the fourth quarter of the prior fiscal year. Selling, general and administrative expenses Selling, general and administrative expenses decreased 12% to $1,765,000 compared to $2,019,000 for the first quarter of the prior year. The decrease of $254,000 is primarily the result of a reduction in variable selling costs related to the changes in net sales. Selling, general and administrative expenses increase to 26% of sales of the prior year's level of 19% reflecting the fixed components of these expenses. 10 NANTUCKET INDUSTRIES, INC. -------------------------- AND SUBSIDIARIES ---------------- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL ------------------------------------------------- CONDITION AND RESULTS OF OPERATIONS ----------------------------------- (Continued) LIQUIDITY AND CAPITAL RESOURCES - ------------------------------- In March, 1994 the Company was successful in refinancing its credit agreements with (i) a three year $15,000,000 revolving credit facility, including a $3,000,000 letter of credit facility, with Congress Financial, (ii) a $2,000,000 Term Loan Agreement with Chemical Bank and (iii) an additional $1,500,000 Term Loan with Congress replacing the Industrial Revenue Bond financing of the Cartersville, Georgia manufacturing plant. On May 31, 1996, the Company amended its Loan and Security Agreement with Congress Financial Corporation dated March 24, 1994. This amendment provided (a) $251,000 in additional equipment term loan financing, (b) extension of the repayment period for all outstanding term loans, (c) supplemental revolving loan availability from March 1st through June 30th of each year and (d) extension of the renewal date to March 20, 1998. Additionally, the $1,000,000 investment in the Company by the Management Group and the sale of 490,000 shares of common treasury stock to GUESS?, Inc. and certain of its affiliates increased the Company's liquidity and capital resources. The net proceeds of $2.9 million from the sales of treasury shares was used to prepay $500,000 of bank debt and the balance provided additional working capital resources. Under the terms of the $2,000,000 Term Loan Agreement with Chemical Bank, scheduled installments of $500,000 each were due on December 15, 1995 and March 15, 1996. As of December 15, 1995 the Company agreed to an amendment providing for payments of $100,000 each on December 31, 1995 and January 31, 1996, with the remaining $800,000 to be paid in 15 equal installments commencing March 31, 1996. The Company believes that the credit facility, as amended, combined with the $3.5 million private placement, provides adequate financing flexibility to fund its operations at current levels.. Working capital decreased $828,000 from year-end levels to $9,998,000. This decrease is primarily due to a $949,000 decline in inventory levels resulting from close-out sales. A decrease in accounts receivable was offset by a decrease in accounts payable. The Company believes that the moderate rate of inflation over the past few years has not had significant impact on sales or profitability. -----END PRIVACY-ENHANCED MESSAGE-----