SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Current Report
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (date of earliest event reported) March 29, 2001
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Empire of Carolina, Inc.
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(Exact name of registrant as specified in its charter)
Delaware
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(State or other jurisdiction of incorporation)
1-7909 13-2999480
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(Commission File Number) (IRS Employer Identification No.)
4731 West Atlantic Avenue, Suite B-1, Delray Beach, FL 33445
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(Address of principal executive offices, including Zip Code)
Registrant's telephone number, including area code (561) 498-4000
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5150 Linton Blvd., Delray Beach, FL 33484
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(Former name or former address, if changed since last report)
Item 5. Other Events
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The Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 2000 was due to be filed on or before March 31, 2001;
however, the Company was unable to file, without unreasonable effort and
expense, the required Annual Report on Form 10-K. On March 29, 2001, the Company
submitted a no action request to the Commission requesting that its Exchange Act
periodic reporting obligations be modified effective as of March 31, 2001, the
date upon which the filing of the Company's Form 10-K was required. A copy of
the no action request is filed herewith as Exhibit 99.1.
The Company filed for reorganization under Chapter 11 on
November 17, 2000 and has continued operations on a debtor-in-possession basis.
In lieu of continuing to file Quarterly Reports on Form 10-Q and Annual Reports
on Form 10-K pursuant to Section 13 of the Exchange Act, the Company proposes to
file with the Commission, under cover of Current Reports on Form 8-K, copies of
the monthly consolidated financial reports and other reporting that it and its
subsidiaries are required to file, as debtors-in-possession, with the Bankruptcy
Court pursuant to Bankruptcy Rule 2015 and other Orders of the Court entered
during the Bankruptcy Case.
Item 7. Financial Statements, Pro Forma Financials and Exhibits
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(c) Exhibits
Exhibit
Number Description
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99.1 No Action Request Letter dated March 29, 2001.
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.
EMPIRE OF CAROLINA, INC.
By: /s/James J. Pinto
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James J. Pinto
Dated: April 4, 2001. Director and Acting Executive Officer
March 29, 2001
Office of the Chief Counsel
Division of Corporation Finance
Securities and Exchange Commission
450 Fifth Street, S.W.
Washington, D.C. 20549
No Action Request
Sections 12(h), 13(a), and 15(d) of the
Securities Exchange of 1934, as amended
Re: In re Empire of Carolina, Inc. and Empire Industries, Inc.,
Debtors, Chapter 11 Case Nos. 00-35179 and 00-35180-BKC-PGH
(Jointly Administered) (the "Bankruptcy Case")
Ladies and Gentlemen:
On behalf of Empire of Carolina, Inc., a Delaware corporation
(the "Company") and a debtor-in-possession operating pursuant to Title 11 of the
United States Code (the "Bankruptcy Code") before the United States Bankruptcy
Court for the Southern District of Florida (the "Bankruptcy Court"), we
respectfully request relief from the Securities and Exchange Commission (the
"Commission") pursuant to Section 12(h) of the Securities Exchange Act of 1934,
as amended ("Exchange Act"), exempting the Company, during the pendency of the
Bankruptcy Case (as referenced above), from compliance with the periodic
reporting requirements of Sections 13(a) and 15(d) of the Exchange Act.
Alternatively, we hereby request confirmation from the Division of Corporation
Finance of the Commission (the "Division") that it will neither object nor
recommend to the Commission any enforcement action if, during the pendency of
the Company's bankruptcy case, it suspends or modifies its obligation to comply
with the periodic reporting requirements of Sections 13(a) and 15(d) of the
Exchange Act, based on the facts and circumstances described below.
According to Exchange Act Release No. 34-9660, promulgated by
the Commission on June 30, 1972 (the "Release"), and as articulated in
previously published no-action positions of the Division, in lieu of continuing
to file Quarterly Reports on Form 10-Q and Annual Reports on Form 10-K pursuant
to Section 13 of the Exchange Act, the Company proposes to file with the
Commission, under cover of Current Reports on Form 8-K, copies of the monthly
consolidated financial reports and other reporting that it and its subsidiaries
are required to file, as debtors-in-possession, with the Bankruptcy Court
pursuant to Bankruptcy Rule 2015 and other Orders of the Court entered during
the Bankruptcy Case.
The Company's annual report on Form 10-K for the fiscal year
ended December 31, 2000 is due to be filed on or before March 31, 2001. The
Company is unable to file, without unreasonable effort and expense, the required
Annual Report on Form 10-K. The Company is hereby requesting that its Exchange
Act periodic reporting obligations be modified as set forth herein effective as
of March 31, 2001, the date upon which the filing of the Company's Form 10-K is
required.
Office of the Chief Counsel
Division of Corporation Finance
March 29, 2001
Page 2
A. BACKGROUND
The Company, through its subsidiaries, designs, develops,
manufactures and markets a broad range of consumer products including children's
toys.
On November 17, 2000, the Company and its subsidiary, Empire
Industries, Inc., filed with the Bankruptcy Court voluntary petitions for
protection from their creditors under Chapter 11 of the Bankruptcy Code. The
cases for the Company and Empire Industries, Inc. are being jointly
administered. The Company has been current in its Exchange Act reports for the
12 months prior to November 17, 2000 and has been filing 8-K's with respect to
certain reportable events during the pendency of the Bankruptcy Case.
Accordingly, the reporting history of the Company for the period from November
17, 1999 through February 28, 2001 is as follows:
Date Filed Name of Form
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1. November 17, 1000 10-Q
2. March 30, 2000 10-K
3. May 1, 2000 10-K/A-1
4. May 2, 2000 10-K/A-2
5. May 5, 2000 Definitive Proxy Statement
(Schedule 14-A)
6. May 15, 2000 10-Q
7. August 14, 2000 10-Q
8. September 29, 2000 8-K
9. November 14, 2000 Form 12b-25 for Form 10-Q
10. November 20, 2000 Form 10-Q
11. November 20, 2000 8-K
12. January 9, 2001 8-K
13. January 16, 2001 8-K
14. February 2, 2001 8-K
15. February 28, 2001 8-K/A
Office of the Chief Counsel
Division of Corporation Finance
March 29, 2001
Page 3
Accordingly, the Company believes, based on the current status of all of its
previous reporting efforts, the status of the Bankruptcy Case (as discussed
further below) and its overall financial condition, that the relief sought
herein is being requested in a timely manner and not while it is attempting to
emerge from the Bankruptcy Case.
The Company presently is managing its business as a
debtor-in-possession pursuant to the provisions of the Bankruptcy Code, and has
substantially curtailed its business operations. Virtually all of the Company's
cash flow is paid to its Lenders pursuant to a debtor-in-possesion financing
Order of the Bankruptcy Court, and the Company is dependent upon its
debtor-in-possession financing to continue its reduced operations. In addition,
the Company sold a substantial portion of its interest in various operating
subsidiaries on January 18, 2001 (as discussed further below).
At this time, the Company is evaluating all of its
reorganization prospects and has made no determination that it can or will file
a Plan of Reorganization pursuant to Sections 1121-1129 et seq. of the
Bankruptcy Code.
The Company has been authorized by Bankruptcy Court Orders to
do, inter alia, the following:
1. Pay various employee related obligations, critical
and foreign vendors;
2. Retain various professionals (but has not received
consent from its Lenders to incur the substantial
expense to retain its auditors in the Bankruptcy
Case);
3. Borrow funds and use cash collateral for operations
pursuant to post-petition agreements and Agreed
Orders with its Lenders;
4. Sell all of the outstanding stock of three of its
non-debtor subsidiaries, Apple Sports, Inc., Apple
Golf Shoes, Inc. and Dorson Sports, Inc. (the "Apple
Subsidiaries"), and that sale was closed on January
18, 2001; and
5. Avail itself of various forms of other relief
available only under the Bankruptcy Code, including,
without limitation, the rejection of certain leases
and operating agreements, adoption of certain
employee retention programs, and the sale of certain
assets outside the ordinary course of its business.
Office of the Chief Counsel
Division of Corporation Finance
March 29, 2001
Page 4
The Company has authorized 60,000,000 shares of common stock,
$0.10 par value ("Common Stock") and 5,000,000 shares of preferred stock, $0.01
par value ("Preferred Stock"). As of March 28, 2001, the Company had issued
21,617,839 shares of Common Stock, 1,322,487 shares of Series A convertible
Preferred Stock and 1,450 shares of Series C convertible Preferred Stock.
The Company has taken the following steps to inform the market
of its financial condition. On November 17, 2001, concurrent with the filing of
its bankruptcy petition, the Company's Common Stock was suspended from trading
on the American Stock Exchange, Inc. ("Amex"). The Common Stock was delisted
from the Amex on January 10, 2001, because the Company was no longer able to
satisfy certain Amex guidelines.
The following securities are registered pursuant to Section
12(b) of the Act:
Common Stock, par value $0.10 per share
Series A Preferred Stock, par value $0.01 per share
Common Stock Purchase Warrants, $1.375 Exercise Value
Each of these securities was delisted by the American Stock
Exchange on January 10, 2001. There is no active trading market for any of these
securities, none of which are qualified for quotation in the NASDAQ National
Market System. Based upon information supplied to us by The American Stock
Exchange and other sources, we have provided a schedule of the monthly trading
in the common stock during the period August 2000 through November 2000 (when
trading was suspended). . Because of the delisting by Amex, the Company has been
unable to obtain more current trading information, although it has no reason to
believe that trading has occurred since November 2000.
Since the date of the delisting, there has been "no trading"
of the Company's securities. The following is a breakdown of the number of
shares (volume) of common stock traded per month for each of the three months
before and each month after the Company's bankruptcy petition filing on November
17, 2000:
Office of the Chief Counsel
Division of Corporation Finance
March 29, 2001
Page 5
Three Months Prior to Bankruptcy Filing Number of Shares Traded
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August 2000 1,378,300
September 2000 1,218,300
October 2000 887,100
November 1-17, 2000 458,800
Each Month Following Bankruptcy Number of Shares Traded
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November 18-30, 2000 0
December 2000 0
January 2000 0
February 2001 0
March 1-28, 2000 0
To date, the Commission has been provided copies of all
pleadings, notices and Orders in the Company's bankruptcy proceeding, and has
informally advised bankruptcy counsel for the Company that it would continue to
monitor all proceedings and events in the Bankruptcy Case.
In an effort to inform its security holders and the market of
its deteriorating financial condition, the Company has made the following
filings:
1. Filed a Form 8-K on November 20, 2000 regarding its
bankruptcy filing, the suspension of trading on Amex;
the resignation of its Chairman of the Board and
appointment of new Chairman of the Board;
2. Filed a Form 8-K on January 9, 2001 regarding the
preliminary approval by the U. S. Bankruptcy Court of
sale of assets of the Apple Subsidiaries;
3. Filed a Form 8-K on January 16, 2001 regarding the
delisting by Amex;
4. Filed a Form 8-K on February 2, 2001 reporting the
completion of the sale of the Apple Subsidiaries;
5. Filed a Form 8-K/A on February 28, 2001 reporting pro
forma financial information as to the sale of the
Apple Subsidiaries; and
6. Provided Bankruptcy Court required notice of the
commencement of the Bankruptcy Case to all equity
security holders of record.
Office of the Chief Counsel
Division of Corporation Finance
March 29, 2001
Page 6
The Company timely filed its Form 8-K regarding its bankruptcy
filing. The Company was required to file a Form 8-K within fifteen (15) calendar
days following the filing of its bankruptcy petition. As indicated above, the
Company filed its bankruptcy petition on November 17, 2000, and filed its
corresponding Form 8-K regarding the bankruptcy filing on November 20, 2000.
B. REQUESTED RELIEF
The Company respectfully notes that the Division previously
has agreed not to recommend enforcement action with respect to suspended or
modified Exchange Act reporting by issuers who are the subject of bankruptcy
cases. Indeed, the Release expressly reflects the Division's position that it
will accept reports which differ in form or content from the Quarterly Reports
on Form 10-Q or Annual Reports on Form 10-K required by Sections 13 or 15(d) of
the Exchange Act, where the issuer is subject to bankruptcy proceedings or has
severely curtailed its operations and if and to the extent that the modified
reporting procedure is consistent with the public interest and the protection of
investors. In the Release, the Division indicated that in determining whether
the modification was appropriate, it would consider the extent to which
continued compliance with the periodic reporting requirements of the Exchange
Act would impose burdens on the issuer.
The Release also refers to Section 12(h) of the Exchange Act,
which generally permits the Division to exempt issuers in whole or in part from
compliance with the periodic reporting requirements of the Exchange Act if
certain criteria are met. The Company believes that many of the bases for
granting relief under Section 12(h) are applicable here, i.e., the lack of
trading activity in its securities, the delisting of the Common Stock from the
Amex, the diminished scope of its business operations, the need to expend
significant management time and resources, and the need for funds to formulate
and implement the Company's plan of reorganization.
Further, the Release cites Exchange Act Rule 12b-21 as a basis
for relief from the Exchange Act's periodic reporting requirements. Such Rule
provides, in relevant part, that if "any required information is unknown and not
reasonably available to the registrant, . . . because the obtaining thereof
would involve unreasonable effort or expense, . . . the information may be
omitted . . . ." In its discussion of Rule 12b-21, the Release states that "in
general, an unreasonable effort or expense would result if the benefits which
might be derived by the shareholders of the issuer from the filing of the
information are outweighed significantly by the cost to the issuer of obtaining
the information."
Office of the Chief Counsel
Division of Corporation Finance
March 29, 2001
Page 7
The Company respectfully believes that granting the relief
requested herein is consistent with previous published no-action positions of
the Division where, as here, the full reporting requirements of Section 13 or
15(d) of the Exchange Act were materially burdensome to the issuer, unnecessary
to protect and inform public investors, and the proposed modification of the
periodic reporting requirements were not inconsistent with the public interest.
See, e.g., Comptronix Corporation (available April 4, 1997); First Executive
Corporation (available November 14, 1991); F & M Distributors, Inc. (available
May 1, 1996); I.C.H. Corporation (available May 10, 1996); Cray Computer
Corporation (available May 16, 1996); Focus Surgery, Inc. (available October 3,
1996); Midwest Communications Corporation (available October 30, 1991); Big Sky
Transportation Co. (available January 23, 1991); Midway Airlines, Inc.
(available April 17, 1991); MMR Holding Corp. (available December 6, 1990);
Washington Bancorporation (available October 30, 1990); SPC, Inc. (available
September 25, 1990); Selectors, Inc. (available September 19, 1990); TTS, Inc.
(available June 4, 1990); Bio-Response, Inc. (available April 2, 1990); American
Biomaterials Corp. (available March 3, 1989); Berkey Inc. (available December
21, 1989); Mosely Holding Corp. (available June 9, 1989); Fitzgerald, DeArman &
Roberts, Inc. (available December 9, 1988); Argo Petroleum Corporation
(available June 15, 1987); Baldwin-United Corporation (available August 7,
1985); Carnegie International Corporation (available July 1, 1983); and American
Reserve Corporation (available Dec. 9, 1982).
The Company believes that compliance with the reporting
requirements of the Exchange Act imposes an unreasonable and significant burden
upon the Company. First, the Company is insolvent and does not believe there
could be distributions made to its shareholders outside of reaching an agreement
for a consensual Plan of Reorganization with its Lenders and Unsecured
Creditors. Second, the Company believes that the accounting and legal services
required to complete on-going Exchange Act compliance would aggregate in excess
$100,000 per annum, an expense the Company's Lenders are presently unwilling to
fund in the absence of a consensual Plan of Reorganization to recapitalize the
Company. As noted above, the Company's obligation to continue to file periodic
reports will present an undue hardship, due to the Company's deteriorating
financial condition. The Company estimates that the cost of an audit of its
consolidated financial statements for inclusion in the 2000 Form 10-K and
subsequent 2001 10-Q's would be substantial and that such cost outweighs any
benefits thereof to shareholders and would unnecessarily divert the Company's
limited supply of funds, management time and other human resources that
otherwise would be available for use by the Company in connection with
formulating and implementing its plan of reorganization for the benefit of
creditors and other constituent groups. The Company's continued filing of
periodic reports would present an undue hardship for the Company, and would make
it difficult for the Company to comply with the necessary disclosure
requirements. Granting the Company relief would be consistent with the
protection of investors, as such relief would assist in preventing the Company
from deteriorating more rapidly.
Office of the Chief Counsel
Division of Corporation Finance
March 29, 2001
Page 8
The compilation of financial and non-financial data and the
preparation of future periodic reports required under the Exchange Act would
require expending additional limited resources contrary to the best interests of
the Company's creditors.
The Company and Empire Industries, Inc. have filed sworn
schedules of their assets and liabilities with the Bankruptcy Court and have
filed and will file monthly operating reports with the Bankruptcy Court during
the pendency of their case. According to management of the Company and Empire
Industries, the information contained in these schedules pursuant to the
Bankruptcy Code is sufficient for the protection of investors while the issuer
is subject to the jurisdiction of the Bankruptcy Court. Each such report covers
the prior month, and is required to be filed within 15 days next following the
end of each such relevant month. The information in the report includes the
following unaudited items: a balance sheet, an expense sheet, a statement of
cash flows, and a statement of wages and taxes paid. The Company proposes to
file with the Commission during the pendency of the Bankruptcy Case copies of
all of the financial reports previously filed and that are required to be filed
by it with the Bankruptcy Court under cover of a Current Report on Form 8-K and
thereafter within 15 days next following the date on which such reports are so
filed. This modified reporting procedure would replace the Company's filing of
Quarterly Reports on Form 10-Q and Annual Reports on Form 10-K pursuant to
Section 13 of the Exchange Act. Additionally, if necessary, the Company can
provide unaudited financial statements for the calendar year ending 2000, and
the months subsequent thereto as they are prepared and become available during
the course of the Bankruptcy Case. The Company believes that no materially
useful information would be provided by requiring future audited financial
statements and that the expense of production of such statements would reduce
the distribution to the Company's unsecured creditors.
Finally, we believe that because there is virtually no public
trading in the Common Stock, there presently is no expectation of a distribution
to stockholders upon confirmation of a plan of reorganization, and extensive
information regarding the Company and the status of the bankruptcy case already
has been publicly disclosed in the Current Reports on Form 8-K previously filed
by the Company with the Commission, in press releases and in prior
communications with shareholders, further reporting under Section 13 of the
Exchange Act will not serve the disclosure and investor protection purposes
underlying the Exchange Act.
C. CONCLUSION
Based upon the foregoing, we respectfully request on behalf of
the Company either (i) an order from the Commission pursuant to Section 12(h) of
the Exchange Act exempting the Company, during the pendency of its bankruptcy
case, from compliance with the periodic reporting requirements of Section 13 and
15(d) of the Exchange Act or (ii) that the Division agree not to recommend
enforcement action to the Commission if, during the pendency of the Company's
bankruptcy case, it implements the herein described modified reporting
procedures in lieu of compliance with Section 13 of the Exchange Act.
Office of the Chief Counsel
Division of Corporation Finance
March 29, 2001
Page 9
The undersigned has been advised that the Company acknowledges
and understands that any exemptive relief granted or no-action position taken by
the Division pursuant to the request made hereby would be based on the
representations set forth herein, that any different facts or conditions might
require the Division to reach a different conclusion, and that any such relief
or position would not constitute a legal conclusion in respect of the questions
presented herein but, instead, only would constitute an expression of the
Division's position on enforcement with respect thereto.
Pursuant to the requirements of Release No. 33-6269, seven
additional copies of this letter are enclosed herewith. If the Division is not
inclined to respond favorably to the relief requested herein, the undersigned
would appreciate the opportunity to discuss with the Division's staff any
concerns prior to receipt of a written response. If the Staff has any questions
or needs additional information in respect of this no-action request, please do
not hesitate to call the undersigned at (561) 650-7928.
Kindly acknowledge your receipt hereof by file-stamping the
enclosed duplicate and returning it to the undersigned in the self-addressed,
postage paid envelope provided for such purpose.
Very truly yours,
/s/Morris C. Brown
cc: Brian K. Gart, Esq.
Susan Sherrill-Beard, Esq. (SEC-Atlanta Office)
Board of Empire of Carolina, Inc.