-----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, BNqBni9kDjiCiaAc7S8XU21rKCbqH4g3J6k4DTeeHIYllia5PZNr0O1hSlVFiNw0 fjtM2zGsJjMlrTmaPnDM1Q== 0000070855-96-000020.txt : 19961106 0000070855-96-000020.hdr.sgml : 19961106 ACCESSION NUMBER: 0000070855-96-000020 CONFORMED SUBMISSION TYPE: 10-Q/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19960629 FILED AS OF DATE: 19961105 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: NCC INDUSTRIES INC CENTRAL INDEX KEY: 0000070855 STANDARD INDUSTRIAL CLASSIFICATION: WOMEN'S, MISSES', CHILDREN'S & INFANTS' UNDERGARMENTS [2340] IRS NUMBER: 620643336 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q/A SEC ACT: 1934 Act SEC FILE NUMBER: 000-03305 FILM NUMBER: 96654226 BUSINESS ADDRESS: STREET 1: 165 MAIN ST CITY: CORTLAND STATE: NY ZIP: 13045 BUSINESS PHONE: 6077562841 MAIL ADDRESS: STREET 1: JOHN E DAILEY STREET 2: 165 MAIN STREET CITY: CORTLAND STATE: NY ZIP: 13045 FORMER COMPANY: FORMER CONFORMED NAME: NCC LEASING INC DATE OF NAME CHANGE: 19701102 FORMER COMPANY: FORMER CONFORMED NAME: NATIONAL CREDIT CORP DATE OF NAME CHANGE: 19681126 10-Q/A 1 SECURITIES AND EXCHANGE COMMISSION Washington D.C. 20549 Amendmant No. 1 (MARK ONE) FORM 10-Q/A X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly period ended June 29, 1996 _________ 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 0-3305 NCC INDUSTRIES, INC. (Exact name of registrant as specified in its charter) DELAWARE 62-0643336 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 165 MAIN STREET, CORTLAND, NEW YORK 13045 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (607)756-2841 Indicate by check mark whether 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 registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No At June 29, 1996, there were outstanding 4,375,492 shares of registrant's Common Stock, par value $1.00 per share. NCC INDUSTRIES, INC. FORM 10-Q INDEX PART I. FINANCIAL INFORMATION: Item 1. Financial Statements: Consolidated Balance Sheets Consolidated Statements of Income and Retained Earnings Consolidated Statements of Cash Flows Notes to Financial Statements Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations PART II. OTHER INFORMATION: Item 1. Legal Proceedings Item 5. Other Information Item 6. Exhibits and Reports on Form 8-K SIGNATURES -2- PART I - FINANCIAL INFORMATION Item 1. Financial Statements. NCC INDUSTRIES, INC. AND SUBSIDIARY BALANCE SHEETS (UNAUDITED) June 29, December 31, 1996 1995 ASSETS Current assets Cash and cash equivalents $ 1,089,808 $ 725,198 Investments 115,967 671,382 Accounts receivable, net 16,132,995 15,864,241 Inventories (Note 2) 48,814,995 45,020,477 Other current assets 2,823,212 2,347,071 Total Current Assets 68,976,977 64,628,369 Property, plant and equipment at cost, net 9,334,822 10,155,629 Bond issuance cost 50,553 59,138 Other assets 428,417 525,606 $78,790,769 $75,368,742 LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities Notes payable $ - $ - Accounts payable and accrued expenses 36,479,563 32,510,620 Current portion of long-term debt 445,000 445,000 Total Current Liabilities 36,924,563 32,955,620 Long term debt, less current portion 1,916,415 1,916,415 Other liabilities 2,169,054 1,664,956 Shareholder's equity 37,780,737 38,831,751 $78,790,769 $75,368,742 See notes to financial statements. -3- NCC INDUSTRIES, INC. AND SUBSIDIARY STATEMENTS OF INCOME AND RETAINED EARNINGS (UNAUDITED) Three Months Ended Six Months Ended , June 29, July 2, June 2, July 2, 1996 1995 1996 1995 STATEMENTS OF INCOME Net Sales $28,106,000 $34,085,221 $50,800,362 $61,870,819 Cost and expenses Cost of sales, shipping, selling, general and administrative expenses 28,977,278 32,116,222 51,459,339 58,654,359 Interest expense 526,749 469,167 857,014 853,306 29,504,027 32,585,389 52,316,353 59,507,665 Income (loss) before taxes (1,398,027) 1,499,832 ( 1,515,991) 2,363,154 Income taxes (benefit ( 474,352) 429,399 ( 464,977) 648,182 Net Income (loss) ($ 923,675) $1,070,433 ($1,051,014) $ 1,714,972 Income per common share ($.21) $.24 ($.24) $.39 Weighted average shares used in computing per share amounts 4,375,492 4,375,492 4,375,492 4,375,492 -4- Three Months Ended Six Months Ended June 29, July 2, June 29, July 2, 1996 1995 1996 1995 STATEMENTS OF RETAINED EARNINGS Retained earnings, beginning $31,442,688 $29,366,463 $31,570,027 $28,721,924 Net income (923,675) 1,070,433 (1,051,014) 1,714,972 Retained earnings, ending $30,519,013 $30,436,896 $30,519,013 $30,436,896 See notes to financial statements. NCC INDUSTRIES, INC. AND SUBSIDIARY STATEMENTS OF CASH FLOWS (UNAUDITED) Six Months Ended June 29, July 2, 1996 1995 Cash flows from operating activities Net income (loss) ($1,051,314) $1,714,972 Adjustments to reconcile net income (loss) to net cash used in operating activities Depreciation 774,273 735,648 Amortization 8,585 10,187 Provision for losses on accounts receivable 60,000 54,000 Loss from retirement of equipment 131,734 11,848 Transactions with Majority Shareholder- 1,445,812 Net change in operating assets and liabilities: Increase in accounts receivables (328,754) ( 1,858,170) Increase in inventory (3,794,518) ( 7,684,550) Increase in accounts payable and accrued expenses 3,968,943 9,994,539 (Increase) decrease in other assets 97,189 - Increase (decrease) in other liabilities 504,098 ( 72,461) Increase in other current assets (476,141) ( 691,774) Net cash provided by (used in) operating activities (105,605) 3,772,958 Cash flows from investing activities Purchase of plant & equipment ( 85,200) ( 219,233) Proceeds from sales of investments 555,415 - - Net cash provided by (used in) investing activities 470,215 ($ 219,233) See notes to financial statements -6- NCC INDUSTRIES, INC. AND SUBSIDIARY STATEMENTS OF CASH FLOWS (CONTINUED) (UNAUDITED) Six Months Ended Six Months Ended June 29, July 2, 1996 1995 Cash flows from financing activities Repayment of Majority Shareholder advances- ($4,116,377) Net cash used in financing activities ( 4,116,377) Net increase (decrease) in cash $ 364,610 ( 562,652) Cash, beginning of year $ 725,198 $ 1,034,820 Cash, end of quarter $ 1,089,808 $ 472,168 Supplemental disclosure of cash flow information. (See note 4 of Notes to Financial Statements) Cash paid during the six months for interest $ 164,273 $ 445,561 Cash paid during the six months for income taxes $18,360 $ 68,629 See notes to financial statements. -7- NCC INDUSTRIES, INC. AND SUBSIDIARY NOTES TO FINANCIAL STATEMENTS 1. Basis of Presentation: The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X of the Securities and Exchange Commission. Accordingly, they do not include all of the information andfootnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. Operating results for the six month period ended June 29, 1996 are not necessarily indicative ofthe results that may be expected for the year ending December 31, 1996. The balance sheet at December 31, 1995 has been derived from the audited balance sheet at that date. For further information, refer to the consolidated financialstatements and footnotes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 1995. 2. Inventory: a) Inventories at June 29, 1996 are stated at the lower of cost (first-in, first-out) or market (generally realizable net amount), and are obtained from the perpetual inventory records of the Company. No physical inventory was taken. b) Inventories consist of: June 29, December 31, 1996 1995 (unaudited) Raw Materials $ 7,278,591 $7,566,204 Work in process 8,988,946 10,659,170 Finished goods 32,547,458 26,795,103 Total $ 48,814,995 $ 45,020,477 3. Net income per share: Per share amounts are based on the weighted averagenumber of shares outstanding during the period. 4. Registrant's management has announced the pending closure of its Cortland, NY administrative offices by the fourth quarter of 1996, and Registrant will utilize certain administrative services from its majority shareholder Maidenform, Inc. in Bayonne, NJ. Registrant's management estimates that non-employee benefit related costs will include the write-down of impaired assets and will aggregate between $500,000 and $800,000 to be recorded in the third quarter of 1996. The employee-related costs have not been estimated at the time of filing but are expected to be material. Management intends to seek to dispose of the building facility for fair market value and relocate certain employees to Registrant's other facility in Cortland, New York and Maidenform's facility in Bayonne, New Jersey. NCC INDUSTRIES, INC. AND SUBSIDIARY NOTES TO FINANCIAL STATEMENTS It is expected that the remaining employees will be laid off with severance pay. The following exit costs have been recorded in connection with the pending Cortland, New York facility closure: severance payments of approximately $115,000; and employee related benefits of approximately $389,000. All such costs were recorded as general expense on Registrant's income statements. At June 29, 1996, no amounts had been paid and charged against the liability and there were no adjustments to the liability. It is anticipated that the closure of the facility will be substantially completed by the end of 1996 or the first quarter of 1997. In March, 1996 Registrant announced its intent to close its Puerto Rican manufacturing facility by the third quarter of 1996 and has recorded a charge of $1,348,000 for its closure. Management expects to move the manufacturing activities to Maidenform's facilities located in Puerto Rico and the Caribbean and to lay off the employees in Registrant's facility with severance pay. Registrant intends to negotiate with the owner of the facility to terminate the lease prior to expiration and to sell the machinery and equipment to a bona fide purchaser. The following approximate exit costs have been recorded in connection with the pending Puerto Rico facility closure: lease commitment of $478,000; estimates for security and maintenance: $95,000 and $21,000, respectively; severance payments of $588,000; and employee related benefits of $85,000. All such costs were recorded as general expense on Registrant's income statement. At June 29, 1996, no amounts had been paid and charged against the liability and there were no adjustments to the liability. Registrant anticipates that the closure of the Puerto Rico facility be will be substantially complete at the end of the third quarter 1996. -8- ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. Results of Operations Net sales for the second quarter of 1996 were 17.5% lower than the second quarter of 1995 due to continued softness in the brands and private label business of Registrant's major customers. While the cancellation of the "Bill Blass" trademark merchandise continues to affect comparative results, Walmart, which previously purchased the "Bill Blass" garments, has partially replaced this lost business with new "Kathy Lee" trademarked styles resulting in a net decrease of 20% for the second quarter of 1996 as compared to the second quarter of 1995 for Walmart. Registrant's management anticipates continued partial recovery of the sales to Walmart in the second half of 1996. Sales to Mervyn's, another major customer, have declined 30% for the first six months of 1996 as compared to the first six months of 1995 due to reduced orders caused by continued softness in the retail markets. Registrant's management continues to anticipate additional partial recovery of this business in the second half of 1996. Sales to Mast Industries declined 6% in the first six months of 1996 as compared to the first six months of 1995. However, continued improvement in shipments to Mast are anticipated by Registrant's management in the second half of 1996. Registrant's management also anticipates at least partial recoveries in its branded product lines which will reduce inventory levels further. Partially offsetting a 21% decline in unit volume is an increase in the average revenue per unit of 4.3% in the first six months of 1996 as compared to the first six months of 1995. Cost of sales, shipping and advertising costs as a percentage were generally consistent for the first six months of 1996 as compared with the first six months of 1995. Selling expense increased as a percentage of sales primarily due to the reduced sales volume. General and administrative expenses were higher in the second quarter of 1996 as compared to the second quarter of 1995 due to the recording of employee benefit costs related to the closure of Registrant's Puerto Rico and Cortland, NY manufacturing facilities. Registrant's management recently announced the pending closure of its Cortland, NY administrative offices nd Registrant will utilize certain administrative services from its majority shareholder, Maidenform, Inc., in Bayonne, N.J. Such closure is expected to occur by the fourth quarter of 1996 and is expected to aid the cash flow position of Registrant and its majority shareholder in 1997. Registrant anticipates the recording of non-employee benefit costs (including impaired assets write downs) in the range of $500,000 to $800,000 in the third quarter of 1996. The employee related benefit costs have not been estimated at the time of filing but are expected to be material. Because of these closure costs, Registrant may not report a profit for the year 1996. As a result of the aforementioned items net loss was $923,675 for the second quarter of 1996 and a loss of $1,051,014 in the first six months of 1996 from a profit of $1,070,433 in the second quarter of 1995 and a profit of $1,714,972 in the first six months of 1995. -9- Financial Condition Net cash flows from operations decreased during the first six months of 1996 as compared with the first six months of 1995 due primarily to the net loss for the period. Inventories at June 29, 1996 were approximately $3,795,000 higher than at December 31, 1995 due in part to the lower than anticipated shipments in the first six months of 1996 but were $2,153,000 lower than at March 30, 1996 due to reduced production levels achieved in response by management to continued softness in the market place for Registrant's products. Net cash flows from investing activities were used to finance operating activities and increase cash on hand. In order to finance its capital and other corporate expenditures, Registrant expects to continue to use cash from operations and amounts available to Registrant under the revolving credit facility described hereafter. Working capital was $32,052,000 at June 29, 1996 as compared to $31,673,000 at December 31, 1995. While Registrant and its parent have credit facilities of $220,000,000, the lines of credit were virtually all utilized at the time of filing. At June 29, 1996, the Maidenform Group was in default of certain financial and other covenants under such credit facilities. Notwithstanding such defaults, such lenders have continued to provide funding to the Maidenform Group under such credit facilities. The Maidenform Group subsequently has reached an agreement with its lenders which will provide financing through the end of the year and includes a waiver of all defaults and less restrictive covenants. However, in the event of a default by Registrant or any other member of the Maidenform Group, these lenders can demand repayment of all amounts outstanding and assert their rights as secured creditors, which security interest includes substantially all of the assets of Registrant and the other members of the Maidenform Group. During 1996, payments by the Maidenform Group to its vendors and suppliers have been extended, as a result of discussions with its vendors. Registrant's management believes that the Maidenform Group's line of credit and debt capacity under the revolving credit facility, together with vendor support and cash flow from operations, are adequate to meet its anticipated operating needs through the end of 1996. However, in the event of any material adverse change in either vendor support or in Registrant's anticipated sales for 1996, Registrant's liquidity would be adversely affected. -10- Item 6. Exhibits and Reports on Form 8-K Exhibits No. Description (a) 27 Financial Data Schedule (b) Reports on Form 8-K No Reports on Form 8-K have been filed during the quarter ended June 29, 1996. -12- EXHIBIT INDEX Title of Document Page Financial Data Schedule 15 -13- NCC INDUSTRIES, INC. PART II - OTHER INFORMATION Item 1. Legal Proceedings Herzog, Heine, Geduld, Inc. ("HHG"), the owner of approximately 30,214 shares of Registrant's common stock, has commenced a class action against Registrant, Maidenform, Inc. ("Maidenform"), Maidenform Worldwide, Inc. ("Worldwide"), Triumph International Overseas, Ltd. (The former majority shareholder of Registrant) ("Triumph"), Guenther Spiesshofer (a former officer and shareholder of Registrant) ("Spiesshofer"), and Frank Magrone (a former officer and shareholder of Registrant) ("Magrone"). The action was commenced in New York State Court, seeks compensatory damages in an unspecified amount and alleges that Triumph Spiesshofer, and Magrone breached their fiduciary duty to HHG by selling their stock of Registrant to Worldwide and failing to include HHG and the remaining shareholders in the sale. The complaint also alleges that Maidenform and Worldwide aided and abetted the selling defendants' breach by structuring the stock purchase to exclude the public shareholders. HHG also claims that Maidenform and Worldwide, as the controlling shareholders of Registrant since the sale, breached their fiduciary duty to the public shareholders by operating Registrant as a subsidiary in the absence of purchasing 100% of the stock. Registrant and its affiliates believes that the claims lack merit and intends to defend the suit vigorously. Item 5. Other Information On July 17, 1996, Frank Magrone resigned as a director, officer and employee of Registrant to pursue other business opportunities, Mr. Magrone has also assumed a consulting position with Maidenform, Worldwide and its affiliated companies. Registrant's management has recently announced the closure of its Main Street administrative facility in Cortland, New York, which closing will occur in the fourth quarter of 1996. Registrant will utilize certain administrative services from its majority shareholder Maidenform, Inc. Registrant's management has not determined the total expected cost of closure which will be recorded in the third quarter of 1996. Registrant's management believes that such closure will result in lower administrative costs and savings for Registrant. -11- SIGNATURES Pursuant to the requirements to 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. NCC INDUSTRIES, INC. By: /s/ Elizabeth Coleman 10-25-96 Elizabeth Coleman Date Chairman, President, and Chief Executive Officer -14-
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