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 March 30, 1996
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
(Address of principal executive offices)
28502-0614
(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 April 30, 1996, there were 4,585,629 shares of common
stock outstanding.
HAMPTON INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information as of March 30, 1996 and April 1, 1995 is
unaudited.)
1. BASIS OF PRESENTATION
The consolidated balance sheets as of March 30, 1996 and
April 1, 1995 and the consolidated statements of operations for
the 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 March 30, 1996 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 30, 1995 annual report to shareholders. The results of
operations for the period ended March 30, 1996 are not
necessarily indicative of the operating results for the full
year.
Certain reclassifications have been made to the comparative
period consolidated financial statements to conform to
classifications used at March 30, 1996.
<TABLE>
2. INVENTORIES
Inventories consist of the following:
<CAPTION>
March 30, April 1, December 30,
1996 1995 1995
------------ ------------ ------------
<S> <C> <C> <C>
Finished goods $ 33,118,478 $ 29,937,556 $ 37,092,349
Work-in-process 4,978,183 8,079,442 4,041,951
Piece goods 5,796,819 12,594,087 4,118,109
Supplies and other 1,162,671 2,013,688 1,062,522
------------ ------------ ------------
$ 45,056,151 $ 52,624,773 $ 46,314,931
</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 March 30, 1996, April 1, 1995, and December 30,
1995, inventories at LIFO were approximately $5,862,000,
$5,790,000 and $5,084,000 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
increasing the net loss by $492,300 ($.11 per share) and by
$332,600 ($.07 per share) for the thirteen weeks ended March 30,
1996 and April 1, 1995, respectively.
I-4
3. OTHER CURRENT ASSETS
Included in other current assets are estimated tax refunds
of approximately $1,097,000 at March 30, 1996, $232,000 at
April 1, 1995 and $1,083,000 at December 30, 1995.
4. BANK AGREEMENT
On May 3, 1996, Hampton Industries, Inc. entered into a new
credit facility ("New Facility") with BNY Financial Corporation,
as Agent. The New Facility provides for a maximum line of
credit of $100,000,000, which includes both direct loans and
letters of credit. The initial proceeds of the New Facility
were used to repay the outstanding indebtedness under the
Company's previously existing bank line of credit.
Availability under the New Facility is based on a formula
of eligible accounts receivable and eligible inventory and
provides for a seasonal overadvance of up to $23,000,000 within
the $100,000,000 maximum line of credit. Direct borrowings bear
interest at the London Interbank Offered Rate or the Prime Rate,
at the option of the Company, plus the applicable margin (as
defined on the New Facility). Borrowings are collateralized by
accounts receivable, inventory and general intangibles of the
Company and its subsidiaries. The New Facility expires in May
1999.
The New Facility contains financial covenants, including
but not limited to tangible net worth and interest coverage, and
restricts fixed asset purchases. It does not allow for the
payment of cash dividends. The Company is not required to
maintain compensating balances, however, it is required to pay a
fee of 1/4% of 1% per annum on the unused portion of the total
facility plus certain other administrative costs.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Results of Operations
Over the past year the Company has implemented several
programs that have had an impact on its operations. With an
increasing amount of products being sourced in both the
Caribbean basin as well as in lesser developed countries
throughout the world, the Company has been able to reduce its
excess domestic production capacity by closing several domestic
production facilities. Contracts for imports are negotiated in
U. S. Dollars which eliminates the exposure to foreign exchange
currency risks. Several major customers have had signigicant
programs with the Company which were extremely price sensitive.
Due to the Company's establishment of specific goals which set
minimum acceptable profit margins, several of these programs
have been discontinued. Branded apparel is generally imported
and continues to grow in importance to the Company. The Company
has also become the licensee for a line of men's loungewear by
Ron Chereskin Studios, as well as, expanded the Rawlings license
to include boys and women's activewear. However, these new
lines will not contribute to sales until 1997.
I-5
<TABLE>
The following table summarizes the operating data for the
periods indicated:
<CAPTION>
Thirteen Weeks Ended
March 30, April 1,
1996 1995
--------- ---------
<S> <C> <C>
Net sales 100.0% 100.0%
Cost of products sold 78.6 80.2
Selling, general and administrative 21.1 19.2
Equity in earnings of
unconsolidated affiliates - -
Gain on disposal of assets (.4) (.1)
--------- ---------
Operating income .7 .7
Interest 1.8 1.4
--------- ---------
Loss before income tax
benefit (1.1) (.7)
Income tax benefit (.4) (.2)
--------- ---------
Net loss (.7)% (.5)%
========= =========
</TABLE>
THIRTEEN WEEKS ENDED MARCH 30, 1996 AS COMPARED TO THE
THIRTEEN WEEKS ENDED APRIL 1, 1995
Net sales declined by 10.3% during the period. Dozens
shipped declined by 16.4% which was offset by a 7.2% increase in
average selling price per dozen. The "Nautica for Boys" and
"Rawlings" line of branded apparel comprised a significant
portion of the increase in the average selling prices. Also,
these two lines combined totalled 35.9% of the Company's sales
for the period as compared to 17.7% in the comparable period
last year.
Gross profit margin for the period increased from 19.8% to
21.4%. Therefore, gross profit only declined slightly for the
period. Operating expenses were basically the same as in the
prior period in spite of higher royalty fees due to the growth
in sales referred to above. As a result of restructuring and
reorganization of certain functions, other categories of
expenses had large declines. The most significant declines
related to compensation along with the related cost of benefits.
The increase in interest was primarily due to higher average
borrowings during the current period as compared to the
same quarter last year.
Liquidity and Capital Resources
Total bank borrowings amounted to $20,850,000 at March 30,
1996 as compared to $24,450,000 on April 1, 1995 and $19,600,000
on December 30, 1995. Outstanding letters of credit amounted to
$31,825,000 at March 30, 1996 as compared to $37,420,000 on
April 1, 1995 and $27,465,000 on December 30, 1995.
On May 3, 1996, Hampton Industries, Inc. entered into a new
credit facility ("New Facility") with BNY Financial Corporation,
as Agent. The New Facility provides for a maximum line of
credit of $100,000,000, which includes both direct loans and
letters of credit. The initial proceeds of the New Facility
were used to repay the outstanding indebtedness under the
Company's previously existing bank line of credit.
I-6
Availability under the New Facility is based on a formula
of eligible accounts receivable and eligible inventory and
provides for a seasonal overadvance of up to $23,000,000 within
the $100,000,000 maximum line of credit. Direct borrowings bear
interest at the London Interbank Offered Rate or the Prime Rate,
at the option of the Company, plus the applicable margin (as
defined on the New Facility). Borrowings are collateralized by
accounts receivable, inventory and general intangibles of the
Company and its subsidiaries. The New Facility expires in May
1999.
The New Facility contains financial covenants, including
but not limited to tangible net worth and interest coverage, and
restricts fixed asset purchases. It does not allow for the
payment of cash dividends. The Company is not required to
maintain compensating balances, however, it is required to pay a
fee of 1/4% of 1% per annum on the unused portion of the total
facility plus certain other administrative costs.
Net cash used in operating activities significantly
improved from the prior period by approximately $13,237,000. In
the prior period, inventories were growing at a substantial
rate. In the current period, inventories have reduced due to
lower sales volume and better inventory management. A portion
of the growth in inventories in the prior period was financed by
an increase in accounts payable and accrued liabilities. Due to
a lower level of domestic manufacturing activities, accounts
payable and accured liabilities have declined since December 30,
1995, by approximately $1,707,000. The decrease in sales during
the current period has reduced the level of accounts receivables
by approximately $3,970,000 compared to the prior year. Due to
the operating loss recorded for the year ending December 30,
1995, there were no substantial tax payments in the current
period. In the prior period, payments for taxes amounted to
$1,191,000 due to the operating profits reported for the year
ending December 31, 1994.
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. There are no major expenditures
planned for the remainder of 1996. The increase in other assets
is primarily due to deferred financing costs related to the new
credit facility, which will be amortized over the term of the
new agreement.
Financing activities report the changes in bank and other
debt. In the prior period, bank borrowings increased
substantially as a result of the significant growth in
inventories. During the current period, bank debt has remained
relatively constant.
The Company's backlog of orders at March 30, 1996 was
approzimately $93,307,000 as compared to $130,285,000 in the
prior year. A change in the buying patterns of our customers, a
planned reduction in the current year sales of approximately 10%
and a change in product mix being sold have all combined to
cause this reduction in the backlog. Management believes that
the sales to date, the order backlog and anticipated new orders
will be sufficient to meet the sales goals for the Company.
Management believes the credit available under the new
credit facility, together with the cash expected to be generated
from operations, is adequate to meet the Company's financing
requirements for the foreseeable future.
I-7
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 thereunder duly authorized.
HAMPTON INDUSTRIES, INC.
Registrant
S/STEVEN FUCHS
________________________
Steven Fuchs, President
S/ROBERT J. STIEHL, JR.
________________________
Robert J. Stiehl, Jr.,
Executive Vice President - Operations
and Chief Financial Officer
Date: May 13, 1996
I-8
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-28-1996
<PERIOD-END> MAR-30-1996
<CASH> 208,933
<SECURITIES> 0
<RECEIVABLES> 22,599,218
<ALLOWANCES> 0
<INVENTORY> 45,056,151
<CURRENT-ASSETS> 1,399,846
<PP&E> 18,481,056
<DEPRECIATION> 0
<TOTAL-ASSETS> 93,051,698
<CURRENT-LIABILITIES> 25,391,416
<BONDS> 0
<COMMON> 5,191,454
0
0
<OTHER-SE> 44,655,693
<TOTAL-LIABILITY-AND-EQUITY> 93,051,698
<SALES> 35,936,152
<TOTAL-REVENUES> 36,079,120
<CGS> 28,238,359
<TOTAL-COSTS> 28,238,359
<OTHER-EXPENSES> 7,604,045
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 653,582
<INCOME-PRETAX> (416,866)
<INCOME-TAX> (152,900)
<INCOME-CONTINUING> (263,966)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (263,966)
<EPS-PRIMARY> (.06)
<EPS-DILUTED> (.06)
</TABLE>
