-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, NZkCQoNG0jSGKFeOf8LnMy15p5mu/sqj6l26sBOxhsKVmGOk6AdTSQmNWqojStxs K1rD4TAPDZvUdYw0vSWRAA== 0000086346-94-000012.txt : 19940819 0000086346-94-000012.hdr.sgml : 19940819 ACCESSION NUMBER: 0000086346-94-000012 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19940702 FILED AS OF DATE: 19940815 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SALANT CORP CENTRAL INDEX KEY: 0000086346 STANDARD INDUSTRIAL CLASSIFICATION: 2320 IRS NUMBER: 133402444 STATE OF INCORPORATION: DE FISCAL YEAR END: 1229 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-06666 FILM NUMBER: 94544256 BUSINESS ADDRESS: STREET 1: 1114 AVE OF THE AMERICAS CITY: NEW YORK STATE: NY ZIP: 10036 BUSINESS PHONE: 2122217500 MAIL ADDRESS: STREET 1: 1058 CLAUSSEN RDSTE 101 CITY: AUGUSTA STATE: GA ZIP: 30907 10-Q 1 2ND QUARTER 10Q 1994 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended July 2, 1994. 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 0-2433 SALANT CORPORATION (Exact name of registrant as specified in its charter) Delaware 13-3402444 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 1114 Avenue of the Americas, New York, New York 10036 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (212) 221-7500 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 Indicate by check mark whether the registrant has filed all documents and reports required to be filed by section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes X No As of August 10, 1994 there were outstanding 14,416,463 shares of the Common Stock of the registrant. TABLE OF CONTENTS PART I. FINANCIAL INFORMATION Item 1. Financial Statements Condensed Consolidated Statements of Operations Condensed Consolidated Balance Sheets Condensed Consolidated Statements of Cash Flow Notes to Condensed Consolidated Financial Statements Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations PART II. OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders Item 6. Exhibits and Reports on Form 8-K SIGNATURE SALANT CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (Amounts in thousands, except per share data)
Three Months Ended Six Months Ended July 2, July 3, July 2, July 3, 1994 1993 1994 1993 Net Sales $ 89,316 $ 85,918 $ 180,660 $ 180,975 Cost of goods sold 70,120 65,398 138,888 138,366 Gross profit 19,196 20,520 41,772 42,609 Royalty income, net of related expenses 1,357 1,652 2,882 3,390 Selling, general and administrative expenses 19,271 18,773 38,832 38,578 Bankruptcy administration expenses - 2,716 - 5,456 Income from operations before interest, taxes and extraordinary gain 1,282 683 5,822 1,965 Interest expense, net 3,951 984 7,341 1,783 Income/(loss) from operations before income taxes and extraordinary gain <2,669> <301> <1,519> 182 Income taxes 71 187 139 260 Loss from operations before extraordinary gain <2,740> <488> <1,658> <78> Extraordinary Gain 63 - 63 - Net loss <2,677> <488> <1,595> <78> Loss per share: Loss per share before extraordinary gain $ <0.18> $ <0.14> $ <0.11> $ <0.02> Extraordinary gain - - - - Net loss per share $ <0.18> $ <0.14> $ <0.11> $ <0.02> Weighted average common stock outstanding (Note 1) 14,988 3,464 14,902 3,464
See Notes to Condensed Consolidated Financial Statements SALANT CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (Amounts in thousands)
July 2, July 3, 1994 January 1, 1993 (Unaudited) 1994 (Unaudited) ASSETS Current Assets: Cash and cash equivalents $ 1,620 $ 2,157 $ 1,600 Accounts receivable, net 41,010 37,382 42,961 Inventories (Note 4) 127,119 104,513 122,675 Prepaid expenses/other cur assets 4,572 4,420 5,099 Total Current Assets 174,321 148,472 172,335 Property, plant and equipment, net 27,565 27,493 30,207 Other assets 81,980 77,425 78,725 Total Assets $ 283,866 $ 253,390 $ 281,267 LIABILITIES AND SHAREHOLDERS' EQUITY/(DEFICIENCY) Current Liabilities: Accounts payable $ 24,633 $ 21,777 $ 18,139 Loans payable 38,023 - 27,791 Accrued liabilities 15,950 22,056 18,634 Reserve for business restructuring 880 2,038 15,374 Total Current Liabilities 79,486 45,871 79,938 Long term debt (Note 5) 108,251 111,851 - Deferred liabilities 18,348 16,766 2,499 Liab def pursuant to chapter 11 cases - - 263,415 Shareholders' Equity/(Deficiency): Common stock-issued and issuable 15,232 15,016 3,698 Additional paid-in capital 107,001 106,726 17,708 Deficit <42,056> <40,461> <84,247> Excess of additional pension liability over unrecognized prior service cost adjust <986> <986> <353> Accumulated foreign currency translation adjustment 204 221 223 Less - treasury stock, at cost <1,614> <1,614> <1,614> Total Shareholders' Equity/(Deficiency) 77,781 78,902 <64,585> Total Liabilities and Shareholders' Equity/(Deficiency) $ 283,866 $ 253,390 $ 281,267
See Notes to Condensed Consolidated Financial Statements SALANT CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW (Unaudited) (Amounts in thousands)
Six Months Ended July 2, July 3, 1994 1993 Cash Flows from Operating Activities: Income from operations $ <1,658> $ <78> Adjustments to reconcile income from operations to net cash used in operating activities: Depreciation 2,610 2,966 Amortization of intangibles 1,251 1,232 Change in assets and liabilities: Accounts receivable <3,628> <4,062> Inventories <19,120> <17,528> Prepaid expenses and other current assets 394 <1,157> Other assets 94 4 Accounts payable 2,526 <2,730> Accrued liabilities/ reserve for business restructuring <7,130> 635 Deferred liabilities <4> 37 Net cash used in operating activities <24,665> <20,681> Cash Flows from Investing Activities: Capital expenditures, net <2,425> <4,175> Acquisitions <8,689> - Proceeds from sale of assets 265 - Net cash used in investing activities <10,849> <4,175> Cash Flows from Financing Activities: Net short-term borrowings 38,023 27,791 Exercise of stock options 491 6 Repayment of pre-petition secured debt - <4,042> Repurchase of long-term debt <3,537> - Net cash provided by financing activities 34,977 23,755 Net decrease in cash and cash equivalents <537> <1,101> Cash and cash equivalents - beginning of year 2,157 2,701 Cash and cash equivalents - end of the first half $ 1,620 $ 1,600
SALANT CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW (Unaudited) (Amounts in thousands)
Six Months Ended Supplemental disclosures of cash flow information:July 2, July 3, Cash paid during the year for: 1994 1993 Interest $ 7,558 $1,549 Income taxes $ 87 $ 104 Conversion of accrued liabilities to liabilities deferred pursuant to chapter 11 cases $1,037
See Notes to Condensed Consolidated Financial Statements SALANT CORPORATION AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements (Thousands of Dollars Except Share Data) (Unaudited) Note 1. Basis of Presentation and Consolidation The accompanying unaudited Condensed Consolidated Financial Statements include the accounts of Salant Corporation ("Salant") and subsidiaries (collectively, the "Company"). The results of operations for the three month and six month periods ended July 2, 1994 and July 3, 1993 are not necessarily indicative of a full year's operations. In the opinion of management, the accompanying financial statements include all adjustments which are necessary to present fairly such financial statements. Significant intercompany balances and transactions are eliminated in consolidation. Certain reclassifications were made to the 1993 unaudited Condensed Consolidated Financial Statements to conform with the 1994 presentation. Income per share is based on the weighted average number of common shares (including shares to be issued pursuant to the Company's plan of reorganization) outstanding during the three month and six month periods ended July 2, 1994 and July 3, 1993. Common stock equivalents were not included in the per share calculations as their effect would be antidilutive. Note 2. Acquisitions On June 10, 1994, the Company acquired all the capital stock of JJ. Farmer Clothing Inc. (a Canadian corporation) and the assets of JJ. Farmer International Limited (a Hong Kong corporation) (collectively "JJ. Farmer") for approximately $5,311 in cash. The purchase price is subject to adjustment based on the future profitability of JJ. Farmer. The acquisition has been accounted for as a purchase, and accordingly, JJ. Farmer's operating results have been included in the Company's consolidated results of operations commencing June 11, 1994. Pro forma results of operations have not been presented as the effect would not be significant. JJ. Farmer's net sales for the five months ended May 31, 1994 and the twelve months ended December 31, 1993 were $3,392 and $13,104, respectively. The excess of cost over the book value of net assets acquired ($4,456 subject to adjustment) is being amortized over a period of not more than 15 years on a straight-line basis. In June 1994, the Company entered into various licensing agreements for dress shirts and men's accessories using the trademarks GANT and SALTY DOG. As part of these agreements, the Company purchased inventory from the licensor, made advance royalty payments to the licensor, and is required to make future minimum royalty payments. Note 3. Discontinued Operations Subsequently Retained In March 1993, the Company adopted a formal plan to restructure and sell the Salant Children's Apparel Group (formerly referred to as the Obion Denton division), which manufactures children's sleepwear. Consequently, the division was accounted for as a discontinued operation for fiscal 1992 and the first three quarters of fiscal 1993. In March 1994, the Company concluded that the value of the division would be maximized by retaining the Salant Children's Apparel Group as part of its continuing operations. As a result, the assets, liabilities and results of operations of the Salant Children's Apparel Group for all periods have been presented as part of continuing operations. The following is a summary of certain selected financial data for the Salant Children's Apparel Group during the prior year period in which it was reported as a discontinued operation.
as of July 3, 1993 Total assets $ 31,632 Total liabilities 11,402 Quarter Ended July 3, 1993 Net sales $ 4,372 Operating loss 1,647
Note 4. Inventories
July 2, January 1, July 3, 1994 1994 1993 Finished goods...... $ 80,672 $ 60,686 $ 79,567 Work-in-process..... 28,766 27,661 23,331 Raw materials and supplies.... 17,681 16,166 19,777 $ 127,119 $104,513 $122,675
Note 5. Long Term Debt In May 1994, the Company purchased and retired $3,600 of its 10 1/2% Senior Secured Notes due December 31, 1998 in an open market transaction at a price below the principal amount thereof. As a result of this transaction, the Company recorded an extraordinary gain of $63. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. The following discussion and analysis of the consolidated results of operations and financial condition should be read in conjunction with the accompanying unaudited Condensed Consolidated Financial Statements and related Notes to provide additional information concerning the financial activities and condition of Salant Corporation ("Salant") and its subsidiary companies (collectively, the "Company"). Results of Operations The following discussion compares the operating results of the Company for the three month and six month periods ended July 2, 1994 with the operating results for the three and six months ended July 3, 1993. As announced in March 1994, the Company determined to retain and continue to operate its Children's Apparel Group (formerly referred to as the Obion Denton Division). Consequently, the Company's financial statements include the results of operations of that division in the results of operations for the three month and six month periods ended July 2, 1994. Operating results for the three and six months ended July 3, 1993 (which had reflected the Children's Apparel Group in discontinued operations) have been adjusted accordingly. Second Quarter 1994 Compared to Second Quarter 1993 For the second quarter of 1994, net sales amounted to $89.3 million, a 4.0% increase over the net sales of $85.9 million in the comparable 1993 quarter. The increase in net sales was attributable primarily to increased sales of men's slacks by the Thomson Division and sales by Manhattan Sportswear, a division which did not start shipping until the third quarter of 1993. These improvements more than offset the reduced sales of the Company's denim-based products and dress shirts. Gross profit as a percentage of net sales decreased to 21.5% ($19.2 million) in the second quarter of 1994 from 23.9% of net sales ($20.5 million) in the comparable 1993 quarter. The reduction in gross profit versus the prior year was primarily the result of (i) continuing price pressure in the Company's dress shirt businesses, as well as start-up costs relating to the manufacture of wrinkle free dress shirts, and (ii) the effects in 1994 of weak sales of Perry Ellis sportswear at retail in late 1993 and late deliveries of Spring 1994 imported linen-based sportswear. The negative impact of these items was partially reduced by increased profitability of the Company's Children's Apparel and Thomson Divisions. Selling, general and administrative expenses for the second quarter of 1994 amounted to $19.3 million (21.6% of net sales) as compared to the second quarter of 1993, when such expenses amounted $18.8 million (21.8% of net sales). Royalty income (net of related expenses) for the second quarter of 1994 was $1.4 million, as compared to $1.7 million in the second quarter of 1993. There were no bankruptcy administration expenses for the second quarter of 1994, compared with $2.7 million incurred in the comparable 1993 period. For the second quarter of 1994, income from operations (before net interest expense of $4.0 million) was $1.3 million, or 1.4% of net sales. For the second quarter of 1993, income from operations (before bankruptcy administration expenses of $2.7 million and net interest expense of $1.0 million) was $3.4 million, or 4.0% of net sales. The shortfall in income from operations versus prior year was primarily the result of the reduction in gross profit described above. Net interest expense for the second quarter of 1994 amounted to $4.0 million as compared to $1.0 million in the prior year's second quarter. During the second quarter of 1993, Salant was operating under chapter 11 of the Bankruptcy Code and accordingly, was not accruing interest on its prepetition debt. Net loss for the 1994 second quarter was $2.7 million compared with a net loss of $488 thousand for the second quarter of 1993. Net loss per share was $0.18 (based on a weighted average of 14,988,000 shares outstanding) in the second quarter of 1994, compared to a net loss per share of $0.14 (based on a weighted average of 3,464,000 shares outstanding) in the second quarter of 1993. Year to Date 1994 Compared to Year to Date 1993 For the six months ended July 2, 1994, the Company reported net sales of $180.7 million, compared to net sales of $181.0 million for the six months ended July 3, 1993. Gross profit as a percentage of net sales decreased to 23.1% ($41.8 million) for the six months ended July 2, 1994 from 23.5% of net sales ($42.6 million) in the comparable 1993 period. The decrease in gross profit as a percentage of net sales was primarily the result of the same factors as indicated for the second quarter. Selling, general and administrative expenses for the first six months of 1994 amounted to $38.8 million (21.5% of net sales), as compared to the comparable 1993 period, when such expenses amounted to $38.6 million (21.3% of net sales). Royalty income (net of related expenses) for the first six months of 1994 was $2.9 million, as compared to $3.4 million in the comparable 1993 period. There were no bankruptcy administration expenses for the six months ended July 2, 1994, compared with $5.5 million incurred in the comparable 1993 period. For the first six months of 1994, income from operations (before net interest expense of $7.3 million) was $5.8 million, or 3.2% of net sales, compared to income from operations (before bankruptcy administration expenses of $5.5 million and net interest expense of $1.8 million) of $7.4 million, or 4.1% of net sales, in the first six months of 1993. The decline in income from operations for the six months is primarily the result of the same factors as indicated for the second quarter. Net interest expense for the first half of 1994 amounted to $7.3 million as compared to $1.8 million in the first half of 1993. During the first half of 1993, Salant was operating under Chapter 11 of the Bankruptcy Code and accordingly, was not accruing interest on its prepetition debt. The net loss for the six months ended July 2, 1994 was $1.6 million compared with a net loss of $78 thousand for the first six months of 1993. The net loss per share was $0.11 (based on a weighted average of 14,902,000 shares outstanding) in the first half of 1994, compared to a net loss per share of $0.02 (based on a weighted average of 3,464,000 shares outstanding) in the first half of 1993. Liquidity and Capital Resources In September 1993, the Company entered into a two year revolving credit, factoring and security agreement (the "Credit Agreement") with The CIT Group/Commercial Services, Inc. ("CIT") to provide seasonal working capital financing, in the form of direct borrowings and letters of credit, up to an aggregate of $120 million (subject to an asset based borrowing formula). Interest on direct borrowings is charged monthly at an annual rate of one-half of one percent in excess of the prime rate of Chemical Bank (which prime rate was 7.25% at July 2, 1994). As collateral for borrowings under the Credit Agreement, Salant has granted to CIT a security interest in substantially all of the assets of the Company. As of July 2, 1994, direct borrowings and letters of credit outstanding under the Agreement were $38.0 million and $40.2 million, respectively, and the Company had unused availability of $23.1 million. As of July 3, 1993, direct borrowings and letters of credit outstanding under the previous financing agreement were $27.8 million and $37.3 million, respectively and the unused availability amounted to $10.7 million. The average interest rate on borrowings under these financing agreements for the three months ended July 2, 1994 and July 3, 1993 was 6.9% and 7.4%, respectively. In September 1993, the Company issued $111.9 million principal amount of 10 1/2% Senior Secured Notes due December 31, 1998 (the "Secured Notes") in connection with the consummation of its plan of reorganization. In May 1994, the Company purchased and retired $3.6 million of its 10 1/2% Senior Secured Notes due December 31, 1998 in an open market transaction at a price below the principal amount thereof. The Credit Agreement and the indenture governing the Secured Notes contain numerous financial and operating covenants, including restrictions on incurring indebtedness and liens, making investments in or purchasing the stock of all or a substantial part of the assets of another person, selling property, making capital expenditures, and paying cash dividends. In addition, the Company is required to maintain minimum levels of working capital and stockholders' equity and to satisfy tests relating to its ratio of total liabilities to stockholders' equity, fixed charge coverage, and maximum cumulative net loss. At July 2, 1994, the Company was in compliance with all covenants. During the first six months of 1994, the Company's short term borrowings increased by $38.0 million. The primary reasons for the increased borrowings were (i) increases in accounts receivable of $3.6 million and inventories of $19.1 million which reflected the Company's normal seasonal pattern, (ii) cash payments aggregating $8.7 million in connection with the acquisition of JJ. Farmer and the GANT and SALTY DOG license agreements, and (iii) the payment of $3.5 million to purchase a portion of the Company's 10 1/2% Senior Secured Notes. During the first six months of 1993, the Company's short-term borrowings increased by $27.8 million. On June 10, 1994, the Company acquired all the capital stock of JJ. Farmer Clothing Inc. (a Canadian corporation) and the assets of JJ. Farmer International Limited (a Hong Kong corporation) (collectively "JJ. Farmer") for $5.3 million in cash plus additional amounts based on future profitability. This acquisition is expected to advance the Company's stated strategy of increasing its penetration of the casual apparel market and to assist the Company in marketing its other brands in Canada. In June 1994, the Company entered into various licensing agreements for dress shirts and men's accessories using the trademarks GANT and SALTY DOG. The Company's business is seasonal in nature. As a result, the Company's working capital requirements increase significantly during the first three quarters of each year. Salant's principal sources of liquidity, both on a short-term and a long-term basis, are provided by operations and borrowings under the Credit Agreement. Based upon its analysis of its consolidated financial position, its cash flow during the past twelve months, and its cash flow anticipated from future operations, Salant believes that its future cash flow, together with the funds available under the Credit Agreement, will be adequate to meet its financing requirements for the next twelve months. There can be no assurance, however, that future developments and general economic trends will not adversely affect the Company's operations and, hence, its anticipated cash flow. PART II. OTHER INFORMATION ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. (a) The annual meeting of the Company's shareholders was held on May 10, 1994. (b) The shareholders approved the election of three Directors for a three-year term expiring at the 1997 Annual Meeting of the Company's shareholders, with the votes for such election as follows:
Director For Withheld Nicholas P. DiPaolo 11,709,504 10,009 Harold Leppo 11,710,166 9,347 Edward M. Yorke 11,710,166 9,347
(c) The shareholders ratified the reappointment of Deloitte & Touche as the Company's independent accountants for the fiscal year 1994. The votes for the ratification were 11,712,657, the votes against the ratification were 4,109 and the votes abstained were 2,645. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K Reports on Form 8-K The Company did not file any reports on Form 8-K during the quarter ended July 2, 1994. SIGNATURE 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. SALANT CORPORATION /s/ R.P. Randall Date: August 12, 1994 Richard P. Randall Senior Vice President, Treasurer and Chief Financial Officer (Principal Financial Officer) -----END PRIVACY-ENHANCED MESSAGE-----