SPECIAL CHARGES PUT DONNKENNY $8.3 MILLION IN THE RED FOR YEAR
NEW YORK — Donnkenny Inc., which has been hit with shareholders’ suits and accounting problems, reported an $8.3 million loss for the year ended Dec. 31 against earnings of $5.2 million, or 38 cents a share, in l995.
The latest year includes an $11.4 million inventory write-down, a $5.1 million charge for sales returns and allowances and $4.2 million in one-time fees and expenses.
The year-ago figures were after a $2.8 million restructuring charge. Sales jumped 32 percent to $255.2 million from $193.3 million.
The company did not break out figures for the fourth quarter and noted that results for 1995 have been restated to reflect the company’s shift in its fiscal yearend to Dec. 31. Donnkenny said it reached an agreement in principle for a new, larger credit facility with its senior lenders, The Chase Manhattan Bank, The CIT Group/Commercial Services Inc., Fleet Bank and Bank of New York.
The new facility increases the company’s available borrowing to $101 million from $70 million and extends its maturity date two years to March 31, 1999.
Separately, the company said Lynn Siemers-Cross, 38, was appointed president and chief operating officer, a new position. In the wake of a barrage of shareholder the suits filed last fall, Richard Rubin resigned as president and chief executive officer last December.
Siemers-Cross was president at Oak Hill Sportswear Corp., which Donnkenny acquired in July 1995.
“Over the near term, I will be focused on the implementation of clear and simple operating efficiencies from which our company’s performance will greatly benefit,” she said in a statement.
Harvey Appelle, chairman, said, “We view the new credit facility as an indication of our financial institution’s confidence in Donnkenny’s business, particularly as we enter the most working-capital-intensive period of the year.” He added that 1997 will be a “transitional” year for the company.
“Although consumer response to Donnkenny’s lines remains high, we need to change the way the company conducts business in order to improve its underlying profitability,” Appelle said. “During the coming year, we will focus on a number of key areas.”
Theses areas include strengthening of operating controls, tighter inventory management, full integration of operating units, more cost-effective sourcing and improved customer service.
“While we expect the effects of these initiatives to result in modest improvements for fiscal 1997,” Appelle said, “these measures will help strengthen Donnkenny’s operating performance over the long term.”
Referring to the new president, Appelle said, “Lynn was instrumental in rebuilding Oak Hill and making it one of the company’s most successful divisions. We believe she will be able to impart the same strong sense of merchandise direction and operating controls throughout our organization and will be instrumental in improving profitability.”
Since November, Donnkenny has been wrestling with the shareholder class action suits, charging insider trading and withholding of material information. The suits claim that Rubin, former chief financial officer Edward T. Creevy and former controller Ronald Hollandsworth sold $13.5 million in company stock from June 1995 to August 1996 at prices ranging from $17.25 a share to $33.88. The stock closed Wednesday at 3 1/2, up 1/2, in over-the-counter trading.
The company also had to restate some of its figures because of accounting irregularities.