<TABLE>
HAMPTON INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEETS
<CAPTION>
March 29, March 30, December 28,
1997 1996 1996
(Unaudited) (Unaudited)
----------- ----------- ------------
<S> <C> <C> <C>
ASSETS
Current assets:
Cash $ 285,440 $ 208,933 $ 310,520
Accounts Receivable - net 21,565,065 22,599,218 18,967,447
Inventories 32,820,424 45,056,151 30,748,132
Deferred income tax assets 547,078 1,181,063 532,078
Refundable income taxes 905,820 1,096,697 905,833
Other current assets 186,181 303,149 132,933
----------- ----------- -----------
Total current assets 56,310,008 70,445,211 51,596,943
Property, plant and equipment - net 18,811,344 18,481,056 19,185,350
Assets held for disposal - net 1,245,335 1,314,523 1,200,684
Investments in and advances to
unconsolidated affiliates 736,664 1,703,522 823,771
Other assets 1,737,781 1,107,386 1,613,792
----------- ---------- -----------
$ 78,841,132 $ 93,051,698 $ 74,420,540
=========== ========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable - banks and current
maturities of long-term debt $ 6,493,548 $ 13,985,132 $ 593,332
Accounts payable 6,695,690 9,942,855 8,412,730
Accrued liabilities 2,342,231 1,463,429 2,432,776
Income taxes 392,400 - -
----------- ----------- -----------
Total current liabilities 15,923,870 25,391,416 11,438,838
Deferred income tax liabilities 1,050,519 869,862 1,034,519
Long-term debt 4,555,014 12,898,346 5,102,991
Retirement plan obligations 3,871,784 4,044,927 4,024,561
----------- ----------- -----------
25,401,187 43,204,551 21,600,909
Stockholders' equity 53,439,946 49,847,147 52,819,631
----------- ----------- -----------
$ 78,841,132 $ 93,051,698 $ 74,420,540
=========== =========== ===========
</TABLE>
Note: The consolidated balance sheet at December 28, 1996 has been
taken from the audited financial statements and condensed.
See notes to consolidated financial statements.
I-1
<TABLE>
HAMPTON INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<CAPTION>
Thirteen Weeks Ended
--------------------
March 29, March 30,
1997 1996
----------- -----------
<S> <C> <C>
Net sales $ 36,356,322 $ 35,936,152
Cost and expenses:
Cost of products sold 27,415,835 28,237,193
----------- -----------
Gross margin 8,940,487 7,698,959
Selling, general and administrative 7,529,452 7,770,590
Rental income - net (174,924) (166,545)
Equity in earnings of unconsolidated
affiliates (46,649) (9,808)
Gain on disposal of fixed assets (7,235) (131,994)
Other expense - net 53,884 -
----------- -----------
Operating income 1,585,959 236,716
Interest 522,645 653,582
----------- -----------
Earnings (loss) before income tax
provision (benefit) 1,063,314 (416,866)
Income tax provision (benefit) 443,000 (152,900)
----------- -----------
Net earnings (loss) $ 620,314 $ (263,966)
=========== ===========
Earnings (loss) per common share $.14 $(.06)
=== =====
Average common shares outstanding 4,585,629 4,585,629
========= =========
</TABLE>
See notes to consolidated financial statements.
I-2
<TABLE>
HAMPTON INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<CAPTION>
Thirteen Weeks Ended
--------------------
March 29, March 30,
1997 1996
--------- ---------
<S> <C> <C>
OPERATING ACTIVITIES:
Net earnings (loss) $ 620,314 $ (263,966)
Adjustments to reconcile net earnings (loss)
to net cash used in operating activities:
Amortization 92,221 6,999
Depreciation 541,225 671,098
Deferred income taxes 1,000 (152,900)
Reserve for doubtful accounts and allowances (47,000) (170,356)
Retirement plan obligations (152,777) (14,360)
Gain on sale of fixed assets (7,235) (131,994)
Equity in earnings of unconsolidated affiliates (46,649) (9,808)
Provision for restructuring costs - (73,185)
Changes in current assets and current liabilities:
Accounts receivable (2,550,618) (145,591)
Inventories (2,072,292) 1,258,780
Other current assets (53,235) (109,023)
Accounts payable (1,717,039) (953,705)
Accrued liabilities (90,543) (753,293)
Income taxes 392,400 (48,183)
----------- ----------
NET CASH USED IN OPERATING ACTIVITIES (5,090,228) (889,487)
=========== ==========
INVESTING ACTIVITIES:
Additions to fixed assets (177,371) (119,914)
Proceeds received from sale of fixed assets 5,492 316,197
Decrease (increase) in investments in and
advances to unconsolidated subsidiaries 28,239 (9,723)
Increase in other assets (143,451) (406,387)
------------ -----------
NET CASH USED IN INVESTING ACTIVITIES: (287,091) (219,827)
------------ -----------
FINANCING ACTIVITIES:
Additions to debt - Banks - net 5,500,572 1,250,000
Payments on debt - Other (148,333) (283,735)
------------ -----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 5,352,239 966,265
------------ -----------
DECREASE IN CASH (25,080) (143,049)
CASH AT BEGINNING OF PERIOD 310,520 351,982
------------ -----------
CASH AT END OF PERIOD $ 285,440 $ 208,933
============ ===========
Cash paid during the period - Interest $ 560,000 $ 608,000
============ ===========
- Income taxes $ 49,600 $ 62,000
============ ===========
</TABLE>
See notes to consolidated financial statements.
I-3
HAMPTON INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information as of March 29, 1997 and March 30, 1996 is unaudited.)
1. BASIS OF PRESENTATION
The consolidated balance sheets as of March 29, 1997 and March 30, 1996
and the consolidated statements of operations and cash flows for the thirteen
week period 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 29, 1997 and March 30, 1996 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 28, 1996 Annual Report to shareholders. The results of operations
for the period ended March 29, 1997 are not necessarily indicative of the
operating results for the full year.
Certain reclassifications have been made to the consolidated financial
statements of March 30, 1996 to conform to classifications used at March
29, 1997.
2. CREDIT FACILITY
The credit facility ("Credit Facility") between Hampton Industries, Inc.
and BNY Financial Corporation, as Agent, provides for a maximum line of credit
of $100,000,000, which includes both direct loans and letters of credit.
Availability under the Credit Facility is based on a formula of eligible
accounts receivable and eligible inventory and provides for seasonal
overadvances of up to $17,500,000 within the $100,000,000 maximum line of
credit. Direct borrowings bear interest at the London Interbank Offered Rate,
plus the applicable margin (as defined in the Credit Facility) or the Prime
Rate, at the option of the Company. Borrowings are collateralized by accounts
receivable, inventory and general intangibles of the Company and its
subsidiaries and expires in May 1999.
The Credit Facility contains financial covenants, including but not
limited to, tangible net worth and interest coverage, restricts fixed asset
purchases and 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
and certain other administrative costs.
3. STOCK OPTIONS
In 1992, the stockholders approved a non-qualified stock option plan
(the "Plan") under which there are presently reserved 363,000 shares of common
stock. The Plan is administered by a committee designated by the
board of directors. Options granted to eligible employees are exercisable in
increments of 20% annually. Stock to be offered under the Plan consists of
I-4
shares of the common stock of the company, whether authorized but unissued or
reacquired by the Company.
<TABLE>
On May 30, 1996, options were granted for 279,500 shares at $4.50 per
share, the fair market value on the date of grant. On March 19, 1997, options
were granted for 73,000 shares at $6.75 per share, the fair market value on
the date of the grant. The exercise price may be paid in cash, common stock
of the Company, or a combination thereof. A summary of the changes in common
stock options is as follows:
<CAPTION>
Price
Number of Range per
Shares Share
--------- ---------
<S> <C> <C>
Outstanding at December 30, 1995 - -
Granted - May 30, 1996 279,500 $4.50
Canceled 4,500 $4.50
--------- ---------
Outstanding At December 28, 1996 275,000 $4.50
Granted - March 19, 1997 73,000 $6.75
Canceled 3,000 $4.50-$6.75
--------- -----------
Outstanding at March 29, 1997 345,000 $4.50-$6.75
========= ===========
</TABLE>
None of the stock options were exercisable at March 29, 1997.
The Company applies the provisions of APB Opinion 25 and related
Interpretations in accounting for its stock options. Accordingly, no
compensation cost has been recognized for the foregoing options. The excess,
if any, of the fair market value of shares on the measurement date over the
exercise price is charged to operations each year as the options become
exercisable. Had compensation cost for these options been determined using
the Black-Scholes option-pricing model described in FASB Statement 123, the
Company would have recorded aggregate compensation expense of approximately
$490,100 for the May 30, 1996 grants and $221,300 for the March 19, 1997
grants. These amounts would be expensed at the rate of 20% per annum over the
option's vesting period. The assumptions used in the option-pricing model
include a risk-free interest rate of 6.7%, expected life of 3 years and ten
months and expected volatility of 39.25%. The pro forma impact of following
the provisions of FASB Statement 123 on the Company's operations and income
per share would be as follows:
<TABLE>
<CAPTION>
Thirteen Weeks Ended
March 29, 1997
--------------
<S> <C>
Net Income - as reported $ 620,314
=========
- pro forma $ 600,947
=========
Net income per common share - as reported $.14
====
- pro forma $.13
====
</TABLE>
Net income per share has been calculated using the weighted average
shares outstanding during the periods.
I-5
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Results of Operations
<TABLE>
The following table summarizes the operating data for the periods
indicated:
<CAPTION>
Thirteen Weeks Ended
--------------------
March 29, March 30,
1997 1996
---- ----
<S> <C> <C>
Net sales 100.0% 100.0%
Cost of products sold 75.4 78.6
------ ------
Gross Margin 24.6 21.4
Selling, general and administrative 20.7 21.6
Net rental income ( .5) ( .5)
Equity in earning of unconsolidated
subsidiaries ( .1) -
Gain on asset sales - ( .4)
Net other expense .2 -
------ ------
Operating income 4.3 .7
Interest 1.4 1.8
------ ------
Earnings (loss) before income taxes 2.9 ( 1.1)
Net earnings (loss) 1.7% ( .7)%
====== ======
</TABLE>
THIRTEEN WEEKS ENDED MARCH 29, 1997 AS COMPARED TO
THE THIRTEEN WEEKS ENDED MARCH 30, 1996
Net sales increased by $420,000 or 1.2% for the quarter as compared to
March 30, 1996. The increase is principally due to an increase in the net
dozens shipped of 1.8% offset by a decline in average price per dozen, due to a
change in product mix. Sales of "branded" apparel decreased slightly for the
period primarily due to earlier shipments of spring merchandise in December
1996. The comparable shipments occurred in January 1996 in the prior year.
Gross profit increased by $1,242,000 during the quarter ended March 29, 1997
or 24.6% of net sales as compared to 21.4% for the corresponding prior period.
This improvement in margins continues to reflect the emphasis on higher margin
sales and an emphasis on cost reductions.
Selling, general and administrative expenses declined by $241,000 or
3.1% during the quarter ended March 29, 1997, as compared to the prior period
due to actions taken in the prior year to reduce certain expenses. Decreases in
personnel related expenses were partially offset by increases in expenditures
for samples and travel.
Interest expense declined due to the lower level of borrowings. The
effective tax rate for 1997 was 41.7% as compared to 36.7% in the prior
period.
I-6
Liquidity and Capital Resources
Outstanding borrowings under the Credit Facility amounted to $5,900,000
at March 29, 1997 as compared to $20,850,000 at March 30, 1996 and $400,000 at
December 28, 1996. Outstanding letters of credit amounted to $25,498,000 at
March 29, 1997 as compared to $31,825,000 at March 30, 1996 and $21,908,000 at
December 28, 1996.
The credit facility ("Credit Facility") between Hampton Industries, Inc.
and BNY Financial Corporation, as Agent provides for a maximum line of credit
of $100,000,000, which includes both direct loans and letters of credit.
Availability under the Credit Facility is based on a formula of eligible
accounts receivable and eligible inventory and provides for seasonal
overadvances of up to $17,500,000 within the $100,000,000 maximum line of
credit. Direct borrowings bear interest at the London Interbank Offered Rate,
plus the applicable margin (as defined in the Credit Facility) or the Prime
Rate, at the option of the Company. Borrowings are collateralized by accounts
receivable, inventory and general intangibles of the Company and its
subsidiaries and expires in May 1999.
The Credit Facility contains financial covenants, including but not
limited to, tangible net worth and interest coverage, restricts fixed asset
purchases and 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
and certain other administrative costs.
At March 29, 1997, the Company's working capital approximated
$40,386,000 as compared to $45,054,000 in the prior year. The current ratio
was 3.54 in the current period as compared to 2.77 in the prior year. In 1996,
$7,750,000 of the outstanding borrowings under the Credit Facility was
classified as long term debt which had the effect of improving both working
capital and the current ratio in that year. In the current year, all borrowings
under the Credit Facility are classified as a current liablilty.
Net cash used in operating activities increased in the current thirteen
week period as compared to the same period in the prior year. At December 30,
1995, the balances of inventories and receivables were such that the Company
instituted programs to improve inventory turns and collection of receivables.
During 1996 these efforts made a significant improvement in cashflow generated
from operations. The current period reflects a more normal operating use of
cash as measured against the balances as of December 28, 1996, reflecting a
normal increase in inventories to support future sales and a normal increase in
receivables due to seasonal sales.
Investing activities include normal replacements of machinery and
equipment and building improvements. There are no major expenditures planned
for the remainder of 1997 and to the extent that normal investments are
made, they will be financed from operations.
Financing activities report the changes in bank borrowings and other
debt which support inventory and accounts receivable levels and other
investments. Cash provided by financing activities during the quarter
ended March 29, 1997 increased $5,352,000 which relates to borrowings under
the Company's Credit Facility.
On May 30, 1996, options were granted for 279,500 shares at $4.50 per
share, the fair market value on the date of grant. On March 19, 1997, options
were granted for 73,000 shares at $6.75 per share, the fair market value on
the date of the grant. The exercise price may be paid in cash, common stock
I-7
of the Company, or a combination thereof. A total of 345,000 options were
outstanding at March 29, 1997, however, none are currently exercisable.
The Company applies the provisions of APB Opinion 25 and related
Interpretations in accounting for its stock options. Accordingly, no
compensation cost has been recognized for the foregoing options. The excess,
if any, of the fair market value of shares on the measurement date over the
exercise price is charged to operations each year as the options become
exercisable. Had compensation cost for these options been determined using
the Black-Scholes option-pricing model described in FASB Statement 123, the
Company would have recorded aggregate compensation expense of approximately
$490,100 for the May 30, 1996 grants and $221,300 for the March 19, 1997
grants. These amounts would be expensed at the rate of 20% per annum over the
option's vesting period. The assumptions used in the option-pricing model
include a risk-free interest rate of 6.7%, expected life of 3 years and ten
months and expected volatility of 39.25%.
The Company's backlog of orders at March 29, 1997 was approximately
$88,984,000 as compared to $93,307,000 in the prior year. 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 that the credit available under the 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.
Impact of Inflation
General inflation in the economy has increased operating expenses of
most businesses. The Company has provided compensation increases generally in
line with the inflation rate and incurred higher prices for materials, goods
and services. The Company continually seeks methods of reducing cost and
streamlining operations while maximizing efficiency through improved internal
operating procedures and controls. While the Company is subject to inflation
as described above, management believes that inflation currently does not have
a material effect on the Company's operating results, but there can be no
assurance that this will continue to be so in the future.
NEW ACCOUNTING PRINCIPLES
Statement of Financial Accounting Standards ("SFAS") No. 128, Earnings per
Share, effective for interim and annual periods ending after December 15,
1997, establishes standards for computing and presenting earnings per share
("EPS") and simplifies the standards for computing EPS currently found in
Accounting Principles Board Opinion No. 15, Earnings Per Share. Common stock
equivalents under APB No. 15, with the exception of contingently issuable shares
(shares issuable for little or no cash consideration), are no longer included
in the calculation of primary, or basic EPS. Under SFAS No. 128, contingently
issuable shares are included in the calculation of primary EPS. There will be no
impact on reported EPS of adopting this statement.
Except for the historical information contained herein, the matters
outlined in the management's discussion and analysis include forward looking
statements that involve risks and uncertainties, including quarterly
fluctuation in results, retail sell rates for the Company's products which may
result in more or less orders than those anticipated and the impact of
competitive products and pricing. In addition, other risks and uncertainties
are detailed from time to time in the Company's SEC reports, including the
report on Form 10-K for the year ended December 28, 1996.
I-8
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, Chief Financial
Officer and Treasurer
Date: May 13, 1997
I-9
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-27-1997
<PERIOD-END> MAR-29-1997
<CASH> 285,440
<SECURITIES> 0
<RECEIVABLES> 21,565,065
<ALLOWANCES> 0
<INVENTORY> 32,820,424
<CURRENT-ASSETS> 1,092,001
<PP&E> 18,811,344
<DEPRECIATION> 0
<TOTAL-ASSETS> 78,841,132
<CURRENT-LIABILITIES> 15,923,870
<BONDS> 0
<COMMON> 5,191,454
0
0
<OTHER-SE> 43,371,148
<TOTAL-LIABILITY-AND-EQUITY> 78,841,132
<SALES> 36,356,322
<TOTAL-REVENUES> 36,356,322
<CGS> 27,415,835
<TOTAL-COSTS> 27,415,835
<OTHER-EXPENSES> 7,354,528
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 522,645
<INCOME-PRETAX> 1,063,314
<INCOME-TAX> 443,000
<INCOME-CONTINUING> 620,314
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 620,314
<EPS-PRIMARY> .14
<EPS-DILUTED> .14
</TABLE>
