UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 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 1, 1995
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 1-6105
Hampton Industries, Inc.
(Exact name of registrant as specified in its charter)
North Carolina 56-0482565
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2000 Greenville Hwy., P.O. Box 614, Kinston, NC 28502-0614
(Address of principal executive offices) (Zip Code)
(919) 527-8011
(Registrant's telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Sections 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 ___
As of August 1, 1995, there were 4,585,629 shares of common
stock outstanding.
<TABLE>
HAMPTON INDUSTRIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
<CAPTION>
July 1, June 25, December 31,
1995 1994 1994
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash $ 63,015 $ 262,644 $ 1,132,205
Accounts receivable-net 18,197,063 16,660,575 22,260,087
Inventories 73,268,571 51,564,758 38,972,245
Deferred income tax benefits 3,576,241 3,206,920 1,639,641
Other current assets 727,635 1,101,575 851,156
----------- ---------- ----------
Total current assets 95,832,525 72,796,472 64,855,334
Property, plant and equipment-net 20,241,526 23,090,241 22,893,125
Assets held for disposal-net 1,399,640 1,294,801 521,759
Investments in and advances to
unconsolidated subsidiaries 1,518,027 1,344,064 1,564,167
Other assets 678,908 937,295 781,500
------------ ------------ ------------
$119,670,626 $ 99,462,873 $ 90,615,885
============ ============ ============
LIABILITIES AND
STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable - banks and
current maturities
of long-term debt $ 30,846,618 $ 8,845,897 $ 1,064,657
Accounts payable 12,196,579 11,809,222 10,179,757
Accrued liabilities 3,584,477 3,553,097 3,289,648
Income taxes 70,320 286,000 1,115,170
------------ ------------ ------------
Total current liabilities 46,697,994 24,494,216 15,649,232
Deferred income tax liabilities 1,494,483 1,690,100 1,497,683
Long-term debt 18,665,685 21,547,303 17,002,214
Retirement plan obligations 4,219,677 3,796,426 4,191,790
Stockholders' equity 48,592,787 47,934,828 52,274,966
------------ ------------ ------------
$119,670,626 $ 99,462,873 $ 90,615,885
============ ============ ============
</TABLE>
Note: The consolidated balance sheet at December 31, 1994 has been taken
from the audited financial statements and condensed.
See notes to condensed consolidated financial statements.
I-1
<TABLE>
HAMPTON INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<CAPTION>
Twenty-Six
Weeks Ended
July 1, June 25,
1995 1994
------------ ------------
<S> <C> <C>
Net sales $ 65,137,429 $ 63,777,498
------------ ------------
Costs and expenses:
Cost of products sold 53,450,367 52,835,786
Selling, general and
administrative 14,608,823 13,022,326
Customs duty refunds (27,043) -
Equity in (earnings) loss
of unconsolidated
subsidiaries (5,613) 127,497
Provision for restructuring
costs 1,211,077 2,278,480
Interest 1,521,797 826,023
------------ ------------
70,759,408 69,090,112
------------ ------------
Loss before income tax
benefit (5,621,979) (5,312,614)
Income tax benefit (1,939,800) (1,974,200)
------------ ------------
Net loss $ (3,682,179) $ (3,338,414)
============ ============
Net loss per common share $(.80) $(.73)
==== ====
Average common shares
outstanding 4,585,629 4,585,629
======== ========
</TABLE>
See notes to condensed consolidated
financial statements.
I-2
<TABLE>
HAMPTON INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
<CAPTION>
Thirteen
Weeks Ended
<S> <C> <C>
July 1, June 25,
1995 1994
------------ ------------
Net sales $ 25,055,196 $ 28,346,504
------------ ------------
Costs and expenses:
Cost of products sold 21,275,656 24,115,817
Selling, general and
administrative 6,968,222 6,228,636
Customs duty refunds (4,116) -
Equity in loss of
unconsolidated subsidiaries 608 81,599
Provision for
restructuring costs 1,211,077 (3,908)
Interest 945,424 450,968
------------ ------------
30,396,871 30,873,112
------------ ------------
Loss before income tax
benefit (5,341,675) (2,526,608)
Income tax benefit (1,845,500) (1,103,800)
------------ ------------
Net loss $ (3,496,175) $ (1,422,808)
============ ============
Net loss per common share $(.76) $(.31)
==== ====
Average common shares outstanding 4,585,629 4,585,629
======== ========
See notes to condensed
consolidated financial statements.
</TABLE>
I-3
<TABLE>
HAMPTON INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>
Twenty-Six
Weeks Ended
<S> <C> <C>
July 1, June 25,
1995 1994
------------ ------------
OPERATING ACTIVITIES:
Net loss $ (3,682,179) $ (3,338,414)
Adjustments to reconcile
net loss to net cash used
used in operating activities
Amortization 26,106 19,212
Depreciation 1,363,446 1,593,788
Deferred income taxes (1,939,800) (1,975,520)
LIFO charge 874,200 1,479,700
Reserve for doubtful
accounts and allowances 234,479 (230,866)
Retirement plan obligations 27,887 255,310
Gain on sale of
operating assets (47,217) (237,745)
Equity in (earnings) loss
of unconsolidated subsidiaries (5,613) 127,497
Provision for restructuring costs 1,193,924 2,196,323
Changes in current assets and
current liabilities
Accounts receivable 3,828,545 7,187,340
Inventories on a FIFO basis (35,170,526) (17,995,112)
Other current assets 123,521 (156,314)
Accounts payable 2,016,822 2,741,024
Accrued liabilities (285,738) 249,186
Income taxes (1,044,850) (2,088)
NET CASH USED IN ------------ ------------
OPERATING ACTIVITIES (32,486,993) (8,086,679)
------------ ------------
INVESTING ACTIVITIES:
Additions to property, plant
and equipment (333,067) (247,579)
Proceeds received from sale of
property, plant and equipment 186,467 1,045,876
Decrease (increase) in investments
in and advances to
unconsolidated subsidiaries 42,485 (1,025,938)
Decrease (Increase) in other assets 76,486 (806,894)
NET CASH USED IN ------------ ------------
INVESTING ACTIVITIES (27,629) (1,034,535)
------------ ------------
FINANCING ACTIVITIES:
Additions to debt - Banks 32,075,000 9,740,000
Payments on debt-Banks - (435,000)
-Other (629,568) (615,438)
NET CASH PROVIDED BY FINANCING ------------ ------------
ACTIVITIES 31,445,432 8,689,562
------------ ------------
DECREASE IN CASH (1,069,190) (431,652)
CASH AT BEGINNING OF PERIOD 1,132,205 694,296
------------ ------------
CASH AT END OF PERIOD $ 63,015 $ 262,644
============ ============
Cash paid during the period-Interest $ 1,299,000 $ 685,000
============ ============
- Income Taxes $ 1,358,000 $ 145,000
============ ============
</TABLE>
See notes to condensed consolidated financial statements.
I-4
HAMPTON INDUSTRIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Information as of July 1, 1995 and June 25, 1994 is
unaudited.)
1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The condensed consolidated balance sheets as of July 1, 1995
and June 25, 1994 and the condensed consolidated statements of
operations for the twenty-six and thirteen-week periods then
ended have been prepared by the Company, without audit. In the
opinion of management, all adjustments (which include only normal
recurring adjustments) necessary to present fairly the financial position,
results of operations and cash flows at July 1, 1995 and for all
periods presented have been made.
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 condensed consolidated financial
statements be read in conjunction with the audited financial statements and
notes thereto included in the Company's December 31, 1994 annual
report to shareholders. The results of operations for the period ended
July 1, 1995 are not necessarily indicative of the operating results for
the full year.
Certain reclassifications have been made to the comparative
period condensed consolidated financial statements to conform to
classifications used at July 1, 1995.
<TABLE>
2. INVENTORIES
Inventories consist of the following:
<CAPTION>
July 1, June 25, December 31,
1995 1994 1994
----------- ----------- -----------
<S> <C> <C> <C>
Finished goods $46,949,406 $32,422,531 $24,757,375
Work-in-process 9,985,328 6,035,496 7,148,319
Piece goods 14,454,889 11,850,713 5,823,719
Supplies and other 1,878,948 1,256,018 1,242,832
----------- ----------- -----------
$73,268,571 $51,564,758 $38,972,245
=========== =========== ===========
</TABLE>
Inventories are stated at the lower-of-cost or market. Cost
is determined primarily by the last-in, first-out method (LIFO).
The LIFO method results in a better matching of cost and revenues.
At July 1, 1995, June 25, 1994, and December 31, 1994, inventories
at LIFO were approximately $6,163,000, $6,862,000 and $5,289,000
lower, respectively, than they would have been had the first-in,
first-out method of determining cost been used. The LIFO valuation method
had the effect of decreasing net earnings by $529,000 ($.12 per
share) for the twenty-six weeks and $197,000 ($.05 per share)
for the thirteen weeks ended July 1, 1995, and decreasing net earnings by
$909,000 ($.20 per share) for the twenty-six weeks and $339,000 ($.07 per
share) for the thirteen weeks ended June 25, 1994.
I-5
<TABLE>
3. STOCKHOLDERS' EQUITY
Stockholders' equity is comprised of:
<CAPTION>
July 1, June 25, December 31,
1995 1994 1994
----------- ----------- -------------
<S> <C> <C> <C>
Common stock $ 5,191,454 $ 5,191,454 $ 5,191,454
Additional paid-in
capital 34,018,908 34,018,908 34,018,908
Retained earnings 14,259,769 13,601,810 17,941,948
---------- ---------- ----------
53,470,131 52,812,172 57,152,310
Less cost of 605,825
shares of common stock
held in treasury 4,877,344 4,877,344 4,877,344
----------- ----------- -----------
$48,592,787 $47,934,828 $52,274,966
=========== =========== ===========
</TABLE>
4. OTHER CURRENT ASSETS
Included in other current assets are estimated tax refunds
of approximately $400,000 at July 1, 1995, $866,000 at June 25,
1994 and $637,000 at December 31, 1994.
5. RESTRUCTURING COSTS
On July 18, 1995, the Company announced the closings of two
manufacturing facilities which completes the Company's program
of reducing excess domestic production capacity begun three years
ago. The closing costs related thereto are included in the second
quarter statement of operations as Provision for restructuring costs.
The restructuring reduced the workforce by approximately 400
associates or 25% of total employees. Plant closing costs totaled
approximately $1,211,000 representing severance pay, payroll taxes and a
noncash charge of $610,000 relating to the writedown of the
manufacturing equipment to estimated realizable value.
In the first quarter of 1994, management announced the
closing of a domestic manufacturing plant, which closing was completed
in July, 1994. The estimated costs of closing this plant are
included in the accompanying statements of operations as Provision for
restructuring costs. The restructuring costs included
approximately $1,434,000 in noncash charges related to the estimated
disposition value of the facility and manufacturing equipment and
approximately $844,000 of severance and related closing costs.
6. BANK CREDIT AGREEMENT
During the quarter, the Company was in violation of certain
provisions of the Bank Credit Agreement relating to the ratio of
borrowing levels to collateral and the ratio of interest
coverage, which the Banks have agreed to waive.
I-6
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND OPERATING RESULTS
The following discussion and analysis of the condensed
consolidated results of operations and financial conditions
should be read in conjunction with the accompanying financial
statements and related notes to provide additional information
concerning the Company's financial activities and conditions.
Results of Operations
<TABLE>
The following table summarizes the operating data for the
periods indicated:
<CAPTION>
Twenty-six Weeks Ended Thirteen Weeks Ended
July 1, June 25, July 1, June 25,
1995 1994 1995 1994
<S> <C> <C> <C> <C>
Net sales 100.0% 100.0% 100.0% 100.0%
Cost of products sold 82.0 82.8 84.9 85.0
Selling, general and
administrative 22.4 20.4 27.8 22.0
Provision for
restructuring costs 1.9 3.6 4.8 -
Equity in (earnings)
loss of
unconsolidated
subsidiaries - .2 - .3
Operating (loss) (6.3) (7.0) (17.5) (7.3)
Interest 2.3 1.3 3.8 1.6
Loss before income
tax benefit (8.6) (8.3) (21.3) (8.9)
Net loss (5.6) (5.2) (14.0) (5.0)
</TABLE>
THIRTEEN WEEKS ENDED JULY 1, 1995 AS COMPARED TO THE
THIRTEEN WEEKS ENDED JUNE 25, 1994
Average selling prices increased by 19.1% during the
period, however, 24.6% fewer dozens were shipped resulting in a decrease
in net sales of 11.6%. Average prices were impacted by a change in
product mix. 1995 included lower sales of promotional goods, as well as
sales of the newly introduced "Nautica for Boys" branded
products which command higher selling prices. The gross profit percent
improved slightly from the prior year because of the higher
margins associated with Nautica.
Selling, general and administrative expenses increased as a
percent of sales because of increased royalty expense, as well
as the decrease in sales volume.
The charge for restructuring costs results from the closing
of two domestic manufacturing facilities. The closings will result
in the termination of approximately 400 management and production
personnel at these facilities, and will effectively reduce the
Company's work force by approximately 25%. The charge includes
approximately $475,000 of termination benefits for the affected
employees and non-cash charges related to the revaluation of
machinery and equipment of approximately $610,000.
Interest expense increased because of the higher level of
borrowings.
The effective tax benefit rate decreased from the prior
year because of the loss of future state tax benefits related
to the plants that were closed.
I-7
TWENTY-SIX WEEKS ENDED JULY 1, 1995 AS COMPARED TO THE
TWENTY-SIX WEEKS ENDED JUNE 25, 1994
Net sales for the period were 2.1% higher than in 1994, as
a result of a 16.8% increase in average selling prices, reduced by
an 11.5% decrease in units shipped. The change in product mix,
together with the reduction in sales of promotional goods related to
discontinued product lines, resulted in higher average selling
prices. The improvement in gross margins is the result of the
increased sale of branded apparel which carry higher gross
margins than other product categories and the decrease in sales of
promotional goods.
Selling, general and administrative expenses during the
current period were higher in relation to sales than in the prior year
primarily as a result of the increased sales of branded apparel,
"Nautica for Boys" and "Rawlings", which sales are subject to
the payment of royalties.
Restructuring costs were lower in 1995 as compared to 1994.
The combined employment of the plants closed in 1995
approximated that of the plant closed in 1994. However, the revaluation
reserves required to write down the facility and equipment to
their net realizable value in 1994 accounted for the major
portion of the higher restructuring charge in 1994.
Interest expense increased as a result of increased
borrowing to support the higher inventory levels.
The effective tax benefit rate decreased to 34.5% as
compared to 37.2% in 1994 because of the greater effect the loss of
future state tax benefits had in 1995 than in 1994.
Liquidity and Capital Resources
As of the end of the quarter, bank borrowings totaled
$42,760,000, as compared to $26,545,000 as of June 25, 1994
and $10,685,000 as of December 31, 1994. The increased
borrowings were used to finance the higher levels of inventory required to
meet the delivery schedules associated with the significant
increase in Fall orders. The Company is presently negotiating an
additional seasonal increase in its line of credit to fund the higher
inventory levels and the anticipated higher accounts receivable levels.
The credit provided under the Agreement, together with the cash
expected to be generated from operations, is adequate to meet the
Company's short-term financing needs. During the quarter, the Company was
in violation of certain provisions of the Bank Credit Agreement
relating to the ratio of borrowing levels to collateral and the ratio of
interest coverage, which the Banks have agreed to waive.
The Company's backlog of orders as of the end of the
current quarter totaled approximately $129,400,000, all of which is
expected to be shipped in 1995 as compared to $110,000,000 as of the same
date last year.
Investing activities include normal replacements of
machinery and equipment and building improvements. The minimal amount of
expenditures during the period have been financed from the
proceeds of the sales of certain assets. No major expenditures
are planned for 1995.
I-8
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of l934, the Registrant has duly caused this report to be
signed on its behalf by the undersigned thereunder duly
authorized.
HAMPTON INDUSTRIES, INC.
Registrant
S/PAUL CHUSED
Date: August 11, 1995 -----------------------
Paul Chused, President
S/ROBERT J. STIEHL, JR.
-----------------------
Robert J. Stiehl, Jr.,
Executive Vice President -
Operations and Chief Financial Officer
I-9
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-30-1995
<PERIOD-END> JUL-01-1995
<CASH> 63,015
<SECURITIES> 0
<RECEIVABLES> 18,197,063
<ALLOWANCES> 0
<INVENTORY> 73,268,571
<CURRENT-ASSETS> 727,635
<PP&E> 20,241,526
<DEPRECIATION> 0
<TOTAL-ASSETS> 119,670,626
<CURRENT-LIABILITIES> 46,697,994
<BONDS> 0
<COMMON> 5,191,454
0
0
<OTHER-SE> 43,401,333
<TOTAL-LIABILITY-AND-EQUITY> 119,670,626
<SALES> 65,137,429
<TOTAL-REVENUES> 65,170,085
<CGS> 53,450,367
<TOTAL-COSTS> 53,450,367
<OTHER-EXPENSES> 14,608,823
<LOSS-PROVISION> 1,211,077
<INTEREST-EXPENSE> 1,521,797
<INCOME-PRETAX> (5,621,979)
<INCOME-TAX> (1,939,800)
<INCOME-CONTINUING> (3,682,179)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,682,179)
<EPS-PRIMARY> (.80)
<EPS-DILUTED> (.80)
</TABLE>
