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 September 30, 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
(Exact name of registrant as specified in its charter)
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 October 31, 1995, there were 4,585,629 shares of common
stock outstanding.
<TABLE>
HAMPTON INDUSTRIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
<CAPTION>
September 30, September 24, December 31,
1995 1994 1994
------------ ------------ ------------
<S> <C> <C> <C>
ASSETS
Current assets:
Cash $ 29,951 $ 654,026 $ 1,132,205
Accounts receivable - net 46,094,696 36,903,013 22,260,087
Inventories 64,634,529 47,663,324 38,972,245
Deferred income tax benefits 2,349,641 1,853,100 1,639,641
Other current assets 673,391 1,078,505 851,156
------------ ------------ ------------
Total current assets 113,782,208 88,151,968 64,855,334
Property, plant and
equipment - net 19,632,704 22,393,903 22,893,125
Assets held for disposal - net 1,399,640 1,294,801 521,759
Investments in and advances
to unconsolidated
subsidiaries 1,670,984 1,361,586 1,564,167
Other assets 666,187 950,044 781,500
------------ ------------ ------------
$137,151,723 $114,152,302 $ 90,615,885
=========== =========== ===========
LIABILITIES AND
STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable - banks and
current maturities of
long-term debt $ 46,946,374 $ 22,752,949 $ 1,064,657
Accounts payable 12,148,358 10,575,719 10,179,757
Accrued liabilities 3,628,199 3,522,684 3,289,648
Income taxes 69,709 406,218 1,115,170
------------ ------------ ------------
Total current liabilities 62,792,640 37,257,570 15,649,232
Deferred income tax
liabilities 1,631,483 1,689,100 1,497,683
Long-term debt 18,471,205 21,472,855 17,002,214
Retirement plan obligations 3,912,069 3,915,004 4,191,790
Stockholders' equity 50,344,326 49,817,773 52,274,966
------------ ----------- -----------
$137,151,723 $114,152,302 $ 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)
Thirty-Nine
Weeks Ended
<CAPTION>
September 30, September 24,
1995 1994
------------ ------------
<S> <C> <C>
Net sales $ 129,232,422 $ 114,553,154
------------ ------------
Cost of products sold 105,210,878 93,731,728
Selling, general
and administrative 22,540,362 19,523,206
Provision for restructuring
costs 1,211,077 2,278,480
Equity in (earnings) loss
of unconsolidated
subsidiaries (93,361) 211,673
Customs duty refunds (27,925) (883,566)
------------ -----------
Operating income (loss) 391,391 (308,367)
Interest 2,898,231 1,608,602
------------ -----------
Loss before income tax
benefit (2,506,840) (1,916,969)
Income tax benefit (576,200) (461,500)
------------ -----------
Net loss $ (1,930,640) $ (1,455,469)
============ ============
Net loss per common share $(.42) $(.32)
==== ====
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
(Unaudited)
Thirteen
Weeks Ended
<CAPTION>
September 30, September 24,
1995 1994
------------ ------------
<S> <C> <C>
Net sales $64,094,993 $50,775,656
------------ ------------
Cost of products sold 51,760,511 40,895,942
Selling, general and
administrative 7,931,539 6,500,880
Equity in (earnings) loss
of unconsolidated
subsidiaries (87,748) 84,176
Customs duty refunds (882) (883,566)
------------ ------------
Operating income 4,491,573 4,178,224
Interest 1,376,434 782,579
------------ ------------
Earnings before income tax
provision 3,115,139 3,395,645
Income tax provision 1,363,600 1,512,700
------------ -----------
Net earnings $ 1,751,539 $ 1,882,945
============ ===========
Net earnings per common share $.38 $.41
==== ====
Average common shares
outstanding 4,585,629 4,585,629
======== ========
</TABLE>
See notes to condensed consolidated financial statements.
I-3
<TABLE>
HAMPTON INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Thirty-Nine
Weeks Ended
<CAPTION>
September 30, September 24,
1995 1994
------------ ------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net loss $ (1,930,640) $ (1,455,469)
Adjustments to reconcile
net loss to net cash
used in operating activities
Amortization 39,159 37,518
Depreciation 2,031,599 2,368,120
Deferred income taxes (576,200) (622,700)
LIFO charge 1,343,600 1,795,200
Reserve for doubtful
accounts and allowances 377,651 (2,144)
Retirement plan obligations (279,721) 373,888
Gain on sale of
operating assets (142,900) (473,999)
Equity in (earnings) loss of
unconsolidated subsidiaries (93,361) 211,673
Provision for restructuring
costs 1,190,754 1,843,300
Changes in current assets
and current liabilities
Accounts receivable (24,212,260) (13,283,820)
Inventories on a FIFO basis (27,005,884) (14,409,178)
Other current assets 177,765 (133,244)
Accounts payable 1,968,601 1,468,159
Accrued liabilities (238,846) 673,100
Income taxes (1,045,461) 118,130
NET CASH USED IN ------------ ------------
OPERATING ACTIVITIES (48,396,144) (21,491,466)
------------ ------------
INVESTING ACTIVITIES:
Additions to property, plant
and equipment (451,346) (389,773)
Proceeds received from sale of
property, plant and 356,292 1,286,211
equipment
Increase in investments in
and advances to
unconsolidated subsidiaries (37,918) (1,700,293)
Decrease (Increase) in other
assets 76,154 (267,115)
NET CASH USED IN ------------ ------------
INVESTING ACTIVITIES (56,818) (1,070,970)
------------ ------------
FINANCING ACTIVITIES:
Additions to debt - Banks 49,555,000 23,260,000
Payments on debt-Banks (1,390,000) -
-Other (814,292) (737,834)
NET CASH PROVIDED BY ------------ ------------
FINANCING ACTIVITIES 47,350,708 22,522,166
------------ ------------
DECREASE IN CASH (1,102,254) (40,270)
CASH AT BEGINNING OF PERIOD 1,132,205 694,296
------------ ------------
CASH AT END OF PERIOD $ 29,951 $ 654,026
============ ============
Cash paid during the period
- Interest $ 2,558,000 $ 1,193,000
============ ============
- Income Taxes $ 1,362,000 $ 149,000
============ ============
</TABLE>
See notes to condensed consolidated financial statements.
I-4
HAMPTON INDUSTRIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Information as of September 30, 1995 and September 24, 1994
is unaudited.)
1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The condensed consolidated balance sheets as of September
30, 1995 and September 24, 1994 and the condensed consolidated
statements of operations for the thirty-nine 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 September 30, 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 September 30, 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 September 30, 1995.
<TABLE>
2. INVENTORIES
Inventories consist of the following:
<CAPTION>
September 30, September 24, December 31,
1995 1994 1994
<S> <C> <C> <C>
Finished goods $49,203,729 $29,919,842 $24,757,375
Work-in-process 7,355,758 7,495,236 7,148,319
Piece goods 6,723,269 8,891,721 5,823,719
Supplies and other 1,351,773 1,356,525 1,242,832
----------- ----------- -----------
$64,634,529 $47,663,324 $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 September 30, 1995, September 24, 1994, and
December 31, 1994, inventories at LIFO were approximately
$6,633,000, $7,177,000 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 $872,000 ($.19 per share)
for the thirty-nine weeks and $343,000 ($.07 per share) for the
thirteen weeks ended September 30, 1995, and decreasing net
earnings by $1,115,000 ($.24 per share) for the thirty-nine
weeks and $206,000 ($.04 per share) for the thirteen weeks ended
September 24, 1994.
I-5
<TABLE>
3. STOCKHOLDERS' EQUITY
Stockholders' equity is comprised of:
<CAPTION>
September 30, September 24, 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 16,011,308 15,484,755 17,941,948
---------- ---------- ----------
55,221,670 54,695,117 57,152,310
Less cost of 605,825
shares of common
stock held in
treasury 4,877,344 4,877,344 4,877,344
---------- ---------- ----------
$50,344,326 $49,817,773 $52,274,966
========== ========== ==========
</TABLE>
4. OTHER CURRENT ASSETS
Included in other current assets are estimated tax refunds
of approximately $413,000 at September 30,1995, $830,000 at
September 24, 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 completed the Company's program
of reducing excess domestic production capacity begun three
years ago. The closing costs related thereto are included in
the statement of operations as Provision for restructuring
costs. The restructuring reduced the work force 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 write-down 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 reduced
the work force by approximately 200 associates. 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
interest coverage and for three days, borrowings exceeded the
maximum credit available, 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
The Company's major customers have significant
merchandising programs that are formulated based on the lowest
prices available. In order to compete for this business, the
Company has developed sourcing resources in the Caribbean basin,
as well as, in lesser developed countries throughout the world.
Contracts are negotiated in $US, which eliminates the exposure
to foreign exchange currency risks. In addition, the Company
has established minimum profit margins below which the Company
will decline orders. This has resulted in the discontinuance of
certain low margin, high volume programs sold by the Company in
prior years with the operating support related thereto being
eliminated through restructuring or alternative sourcing.
<TABLE>
The following table summarizes the operating data for the
periods indicated:
<CAPTION>
Thirty-nine Weeks Ended Thirteen Weeks Ended
Sept. 30, Sept. 24, Sept. 30, Sept. 24,
1995 1994 1995 1994
<S> <C> <C> <C> <C>
Net sales 100.0% 100.0% 100.0% 100.0%
Cost of products
sold 81.4 81.8 80.8 80.5
Selling, general and
administrative 17.4 17.0 12.3 12.8
Provision for
restructuring costs .9 2.0 - -
Equity in (earnings)
loss of unconsolidated
subsidiaries (.1) .2 - -
Custom duty refunds - (.8) - (1.7)
Operating income (loss) .3 (.3) 7.0 8.2
Interest 2.2 1.4 2.2 1.5
(Loss) income before
income tax
benefit (1.9) (1.7) 4.9 6.7
Income tax
(benefit) expense (.5) (.4) 2.1 3.0
Net (loss) income (1.5)% (1.3)% 2.7% 3.7%
</TABLE>
THIRTEEN WEEKS ENDED SEPTEMBER 30, 1995 AS COMPARED TO THE
THIRTEEN WEEKS ENDED SEPTEMBER 24, 1994
Net sales increased by 26.2% during the period as a result
of an 11.5% increase in dozens shipped, together with a 13.2%
increase in average selling prices. Average selling prices were
impacted by the increase in sales volume of the "Nautica for
Boys" line of branded apparel, which represented 9.2% of sales
volume but only 3.2% of the units shipped.
I-7
While selling, general and administrative expenses were
lower as a percent of sales due to the increase in sales volume,
they were higher in terms of absolute dollars primarily because
of the royalty fees related to the sales of the "Nautica for
Boys" and "Rawlings" lines of branded apparel.
Interest expense increased due to the higher level of
borrowing required to finance higher inventory levels and
increased accounts receivable.
The effective tax rate during the period was higher due to
the loss of tax-loss carryforward credits related to the plants
that were closed.
THIRTY-NINE WEEKS ENDED SEPTEMBER 30, 1995 AS COMPARED TO
THE THIRTY-NINE WEEKS ENDED SEPTEMBER 24, 1994
Net sales increased by 12.8%. A 16.0% increase in average
selling prices was offset by a 2.7% decrease in units shipped.
The increase in average selling prices continues to be impacted
by the higher selling prices associated with the "Nautica for
Boys" line of apparel which represented 8.1% of sales volume but
only 3.3% of the units shipped. Gross margins increased by
15.4% in absolute dollars from the prior period as a result of
the increase in sales volume while margins as a percent of sales
remained relatively constant.
Selling, general and administrative expenses increased
during the current period primarily due to the royalty expenses
related to the "Rawlings" and "Nautica for Boys" sales volume.
As a percent of sales, the selling, general and administrative
expenses increased slightly.
The increase in interest expense was related to the higher
level of borrowing necessary to the finance higher inventory
levels and increased accounts receivable.
Restructuring costs were lower in 1995 as compared to 1994
because the revaluation reserve associated with the write-down
of the facilities and equipment to the estimated realizable
value accounted for a higher portion of the restructuring charge
in 1994. The combined employment affected by the restructuring
in both periods was approximately the same..
The effective tax benefit rate was relatively constant in
both periods.
Liquidity and Capital Resources
As of the end of the quarter, bank borrowings totaled
$58,850,000, as compared to $40,500,000 as of September 24, 1994
and $10,685,000 as of December 31, 1994. The maximum credit
available to the Company during the quarter was $65,000,000,
which amount decreases to $55,000,000 on October 16, 1995, to
$45,000,000 on November 16, 1995 and to $20,000,000 on December
16, 1995. Interest on borrowings is computed at LIBOR plus 185
basis points, except that for overnight borrowings, interest is
computed based on the banks' prime rate. 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.
The increased borrowings were used to finance the higher
levels of inventory required to meet the delivery schedules
associated with the significant increased volume of Fall orders,
as well as the related increase in accounts receivable.
The Company was in violation of certain provisions of the
Bank Credit Agreement, having not achieved the required interest
expense coverage ratio for the twelve month period ended
September 30, 1995 and borrowings exceeded the maximum credit
available for three business days subsequent to the step-down
date of October 16, 1995. The banks have agreed to waive both
violations.
I-8
The Company's backlog of orders as of the end of the
current quarter totaled approximately $97,800,000, of which
approximately $60,000,000 is expected to be shipped during the
current fiscal year. At the end of the third quarter of 1994,
the backlog of orders totaled approximately $93,800,000, of
which approximately $57,500,000 was shipped in the fourth
quarter.
Investing activities include normal replacements of
machinery and equipment and building improvements. Expenditures
during the period have been financed from the proceeds of the
sales of certain assets. No major expenditures are planned for
the remainder of 1995.
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: November 13, 1995 --------------------
Paul Chused, President
S/ROBERT J. STIEHL, JR.
-----------------------
Robert J. Stiehl, Jr.,
Executive Vice President -
Operations and Chief
Financial Officer
I-9
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> QTR-3
<FISCAL-YEAR-END> DEC-30-1995
<PERIOD-END> SEP-30-1995
<CASH> 29,951
<SECURITIES> 0
<RECEIVABLES> 46,094,696
<ALLOWANCES> 0
<INVENTORY> 64,634,529
<CURRENT-ASSETS> 673,391
<PP&E> 19,632,704
<DEPRECIATION> 0
<TOTAL-ASSETS> 137,151,723
<CURRENT-LIABILITIES> 62,792,640
<BONDS> 0
<COMMON> 5,191,454
0
0
<OTHER-SE> 45,152,872
<TOTAL-LIABILITY-AND-EQUITY> 137,151,723
<SALES> 129,232,422
<TOTAL-REVENUES> 129,353,708
<CGS> 105,210,878
<TOTAL-COSTS> 105,210,878
<OTHER-EXPENSES> 22,540,362
<LOSS-PROVISION> 1,211,077
<INTEREST-EXPENSE> 2,898,231
<INCOME-PRETAX> (2,506,840)
<INCOME-TAX> (576,200)
<INCOME-CONTINUING> (1,930,640)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,930,640)
<EPS-PRIMARY> (.42)
<EPS-DILUTED> (.42)
</TABLE>
