PART I
ITEM 1. BUSINESS
(a) General Development of Business
Hampton Industries, Inc. and its subsidiaries and divisions
(herein referred to as "Hampton" or "Company") are engaged in the
business of manufacturing and selling wearing apparel.
Hampton, a North Carolina Corporation, is the successor of
several predecessor corporations, the first of which was incorporated
in 1925 in the State of New York under the name of Hampton Shirt Co.
(b) Financial Information About Industry Segments
Hampton has been engaged in one line of business in excess of
five years; reference is made to the financial statements included
herein under ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
(c) Narrative Description of Business
Hampton's principal products consist of men's and boys' shirts
and men's and women's sleepwear, which are produced domestically and
in Central America. In addition, sport and dress shirts, sweaters,
activewear, outerwear and swimtrunks, for both men and boys are
imported from unaffiliated sources located primarily in the Far East.
Hampton's products are principally sold at retail under private
labels. However, the company also manufactures and sells apparel
under the following licenses:
LICENSE PRODUCT CATEGORY
Nautica for Boys' Boys' shirts, pants, outerwear
and swimwear
Rawlings Men's and boys' activewear
Spalding (2) Men's and boys' activewear
Dickies (1) Men's casual and rugged
sportshirts
Justin (2) Men's and boys' western wear
Ron Chereskin (1) Men's sleepwear and robes
Bugle Boy (1) Men's and boys' sleepwear and
robes
Charles Goodnight (2) Ladies sleepwear and robes
Warner Brothers Men's sleepwear and robes and
children's robes and novelty
apparel
(1) Initial sales occurred in 1997.
(2) Initial sales will occur in 1998.
TRADEMARK PRODUCT CATEGORY
Kaynee Boys' and girl's shirts and
school uniforms
Le Tigre Men's and boys' sportshirts and
sportswear
Campus Men's and boys' sportshirts and
sportswear
Branded apparel is becoming a more important part of the success of
the Company's business.
- -1-
Hampton designs its own line of apparel as well as produces apparel
under private label to customers specifications. The Company's products
are manufactured from various combinations of man-made and natural fibers
which are readily available from a number of sources both
domestically and imported. Hampton has no long-term contracts with
any supplier. The average domestic production cycle is approximately
five weeks from the time the fabric is scheduled for cutting until
the finished product is received at the Company's distribution
centers. The production cycle for goods imported or manufactured in
Central America is approximately ten weeks, while the lead time for
goods imported from the Far East can be as long as six months. The
design and production specifications for imported products are
provided to the manufacturers by Hampton.
Hampton's products are sold throughout the United States, to
approximately 2,750 customers including most of the country's leading
national and regional retail chains and department stores. Sales are
made by a nationwide sales staff of 72 salesmen, including 33 field
representatives at the end of 1997. Sales offices are located in New
York, and at the Company's executive and administrative headquarters
in Kinston, North Carolina. As of December 27, 1997 the Company had
approximately 903 full-time associates domestically and approximately
434 associates in the Caribbean. Hampton is not a party to any
collective bargaining agreements, has never experienced a strike or
work stoppage, and believes that it maintains satisfactory
relationships with its associates.
<TABLE>
Hampton's largest customers accounted for approximately 31% of
consolidated sales volume in 1997 and 1996, respectively. Wal-Mart
Stores, Inc. and J.C. Penney Co. are large multi-outlet retail chains
who purchase a broad range of Hampton's products through a variety of
their merchandising departments. There have been no contracts with
either customer for continued business. The following is a breakdown
of their respective sales volume:
<CAPTION>
1997 1996 1995
<S> <C> <C> <C>
J.C. Penney Co. 16% 15% 16%
Wal-Mart Stores, Inc. 15% 16% 18%
</TABLE>
<TABLE>
The following is a breakdown of sales by product categories:
<CAPTION>
1997 1996 1995
<S> <C> <C> <C>
Men's shirts and sportswear 34% 40% 50%
Boys' shirts and sportswear 30% 26% 19%
Ladies' sleepwear 13% 13% 9%
Men's sleepwear 13% 12% 13%
Activewear 9% 7% 7%
Other 1% 2% 2%
</TABLE>
Sales of licensed products accounted for 31%, 23% and 14% of the
consolidated sales for 1997 and the prior two years, respectively.
- -2-
<TABLE>
The following reflects the Company's sourcing of its products:
<CAPTION>
1997 1996 1995
<S> <C> <C> <C>
Imports 51% 56% 47%
Caribbean 29% 24% 24%
Domestic 20% 20% 29%
</TABLE>
All foreign purchases are contracted for in U.S. Dollars;
therefore, there is no currency risk.
As of February 28, 1998, Hampton's backlog of orders was
approximately $109,105,000 as compared to $87,146,000 on the same date
in 1997. The orders are believed to be firm and are expected to be
shipped during the current fiscal year.
The Company relies on various computer applications for the operation
of its business. Several current computer applications could have a
significant impact on the Company if not modified prior to the year 2000.
As part of an reengineering effort and a conversion to a new computer
system, the Company is converting all business applications to new
hardware and software. This conversion will address all issues related
to Year 2000 and is expected to be completed in the early part of 1999.
It is anticipated that the expenditure for this effort will approximate
$500,000 of which a portion has already been spent in 1997. Management
does not believe that this will have a significant impact on the
Company.
The apparel industry is highly competitive as to style, quality
and price. Hampton competes with many other manufactures and
suppliers as to each of its products.
<TABLE>
EXECUTIVE OFFICERS OF REGISTRANT
<CAPTION>
First year
Name and age Office elected
<S> <C> <C>
David Fuchs (73) Chairman and Chief Executive Officer 1975
Steven Fuchs (38) President 1996
Roger M. Eichel (49) Senior Vice President and Secretary 1997
Robert J. Stiehl, Jr. (62) Executive Vice President - Operations,
Treasurer, and Assistant Secretary 1995
Frank Simms (49) Chief Financial Officer and
Vice President of Finance 1997
</TABLE>
Each of the above named was elected for one year or until the
election of a successor. The next election shall take place
immediately following the Annual Meeting of Shareholders to be held
on May 18, 1998. There is no arrangement or understanding between
any of the above pursuant to which they were elected as Officers.
All of the Executive Officers above named, except Robert J.
Stiehl, Jr. and Frank Simms are related family members.
Steven Fuchs is the son of David Fuchs, and Roger Eichel is David Fuchs'
son-in-law.
- -3-
Mr. David Fuchs has held his current executive position for in
excess of five years. Mr. Steven Fuchs was elected to his present
position in January, 1996. From 1993 to January 1996, Mr. Steven
Fuchs was the President of Hampton Shirt Co. (a subsidiary). Prior
to 1993, he held various positions with the Company. Mr. Roger
Eichel was elected to his present position in May, 1997 and prior
thereto, he was Secretary of the Company. Mr. Robert J. Stiehl, Jr.
was elected to his present position in January 1995. For in excess
of five years prior thereto, he was Vice President - Finance. Mr.
Frank Simms was elected Chief Financial Officer in November 1997 and
had previously been Vice President of Finance since May 1995. Prior
to joining Hampton he was the Chief Financial Officer of Riverside
Manufacturing Co. for in excess of five years.
David Fuchs, Steven Fuchs, and Roger Eichel are also
Directors of the Company.
ITEM 2. PROPERTIES
Hampton operates three domestic manufacturing plants, one
manufacturing plant in the Caribbean and three domestic distribution
centers. The Company's sales and merchandising personnel as well as
certain executive officers occupy a building located in New York City.
Hampton's principal executive and administrative offices are located
in North Carolina. All of these properties are owned by the Company.
The New York office is collateralized by a related mortgage loan.
The executive and administrative offices located in North Carolina
are financed through an Industrial Revenue Bond issued by a state
governmental agency. All bonds and mortgages are guaranteed by the
Company and are secured by the underlying assets.
The Company believes that its plants and facilities are in good
repair and adequate in respect to its foreseeable needs. The
machinery and equipment utilized in its facilities are considered by
management to be modern and efficient.
ITEM 3. LEGAL PROCEEDINGS
There are no significant legal proceedings.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
- -4-
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED
STOCKHOLDER MATTERS
(a) Principal Market
The principal market on which Hampton's Common Stock is traded
is the American Stock Exchange under the symbol HAI.
(b) Stock Price and Dividend Information
<TABLE>
The table below presents the high and low market prices for
Hampton's Common Stock.
<CAPTION>
QUARTER ENDED
1997 1996
3/29 6/28 9/27 12/27 3/30 6/29 9/28 12/28
<S> <C> <C> <C> <C> <C> <C> <C> <C>
High 7 1/4 8 1/2 10 1/4 10 1/2 5 1/8 4 7/8 5 3/8 5 7/8
Low 5 13/16 6 5/8 7 3/4 8 3/8 4 5/16 4 1/4 4 1/4 4 3/4
</TABLE>
The Company has not paid a cash dividend on its common stock
since 1973. The present credit agreement includes restrictive
covenants which, among other things, prevent the payment of cash
dividends.
(c) Approximate Number of Holders of Common Stock
The number of holders of record of Hampton's Common Stock as of
December 27, 1997 was approximately 332, including, as a single
holder of record, brokerage firms having more than one stockholder
account.
<TABLE>
ITEM 6. SELECTED FINANCIAL DATA
(In thousands except per common share amounts)
<CAPTION>
1997 1996 1995 1994* 1993
<S> <C> <C> <C> <C> <C>
YEAR ENDED:
Net Sales $163,040 $160,684 $184,593 $172,024 $196,438
Net earnings (loss) 1,083 2,709 (2,164) 1,002 (2,433)
Basic earnings
(loss) per
common share $.24 $.59 $(.47) $.22 $(.53)
Diluted earnings
(loss) per common
share - $.23 $.58 $(.47) $.22 $(.53)
AT YEAR END:
Total assets $78,042 $74,421 $94,271 $90,616 $90,168
Long-term debt 4,110 5,103 5,305 17,002 20,722
Working capital 40,648 40,158 37,501 49,206 48,642
Stockholders'
equity $53,907 $52,820 $50,111 $52,275 $51,273
* (53 Weeks)
</TABLE>
- -5-
The Company has not paid cash dividends on its common stock
since 1973.
The Company uses the LIFO method of costing principally all of
its inventories to more fairly present the results of operations by
matching current costs with current revenues. The LIFO method had
the effect of decreasing net earnings by $404,900 ($.09 per share) in
1997, increasing net earnings by $504,800 ($.11 per share) in 1996
and $153,800 ($.03 per share) in 1995. Income realized as a result
of inventory liquidation was not significant in 1997, $668,200 ($.15
per share) in 1996 and was not significant in 1995.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion and analyses of the 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>
YEAR ENDED
December December December
27, 28, 30,
1997 1996 1995
<S> <C> <C> <C>
Net sales 100.0% 100.0% 100.0%
Cost of products sold 77.3 78.2 83.1
--------- --------- ---------
Gross margin 22.7 21.8 16.9
Selling, general and
administrative 20.8 18.2 16.4
Net rental income ( 0.6) ( 0.4) ( 0.4)
Gain on asset sales - ( 0.4) ( 0.4)
Provision for restructuring
costs - - 0.7
Net other income ( .1) ( .1)
Equity in income of
unconsolidated subsidiaries ( .1) - -
--------- --------- ---------
Operating income 2.7 4.5 0.6
Interest 1.7 2.0 2.2
--------- --------- ---------
Earnings (loss) before income
taxes 1.0 2.5 (1.6)
Net earnings (loss) .7% 1.7% (1.2)%
==== ==== =====
</TABLE>
Fiscal 1997 Versus Fiscal 1996
Net sales for 1997 increased by 1.4%. An increase of 2.4% in the
average selling price was partially offset by a decline of 1.0% in
units shipped. The increase in average selling price is primarily
due to the greater influence of the "branded" product sales.
- -6-
Gross profit margins increased by $2,093,000 for 1997. As a
percent of sales this represented an increase of .9%, from 21.8% in
1996 to 22.7% in 1997, which is primarily attributable to increase
sales of branded product. Gross profit was negatively impacted in 1997
due to an increase in allowances provided to customers of
approximately $761,000. Also, as a result of late delivery of
product, approximately $963,000 was incurred for air shipments which
occurred primarily in the fourth quarter.
Selling, general and administrative expenses increased by
$4,698,000 in 1997. As a percent of sales there was an increase from
18.2% in 1996 to 20.8% in 1997. Royalty and advertising expenses
were 2.4% as compared to 2.1% of sales in 1996, increasing by
$541,000 in 1997. Sales of "Branded" product, for which royalty
expense is recorded, increased from 23.3% of sales in 1996 to 27.5%
in 1997. During 1997, the Company expanded its management team.
Three new divisional presidents were hired as well as a new Vice
President of Corporate Marketing. Certain other individuals were
hired in design, sales and sales administration. These new positions
along with certain related terminations resulted in an increase
in recruiting and severance expenses of $744,000. Compensation and
related fringe benefits increased by approximately $1,815,000 in
1997 as compared to 1996.
During 1997 several new license agreements were entered into
which will not contribute to sales until 1998. The development of
these new brands negatively impacted 1997 by $1,129,000.
A portion of the Company's corporate office building in New York
is leased to third parties. Operations related to this are classified
as Rental Income - net.
During 1996 gains on sale of property were $656,191. In 1997
losses on sale of property were $64,279.
Interest expense decreased by $495,000 from 1996. This decline
is the result of a lower level of borrowing during the year which
resulted from lower average levels of receivables and inventory.
The effective tax rate increased to 34.0% in 1997 from 31.6% in
1996. The rate differential is impacted by the utilization of jobs
credit carryovers and reversal of prior year over accruals and the
equity in earnings of the unconsolidated subsidiary which is not
subject to U. S. federal taxation until such earnings are
repatriated.
Fiscal 1996 Versus Fiscal 1995
Net sales for 1996 declined by 13.0%. A decline of 17.4% in
units shipped was partially offset by an increase of 5.5% in the
average selling price. The increase in average selling price is
primarily due to the greater influence of the "branded" product
sales.
Gross profit margins increased by $3,806,000 for 1996. As a
percent of sales this represented an increase of 4.9% from 16.9% in
1995 to 21.8% in 1996. Two programs that generated approximately
$16,000,000 in sales during 1995 were discontinued by the Company.
These programs were not profitable and their elimination contributed
to the improvement in the margin.
- -7-
Selling, general and administrative expenses declined by
$957,000 in 1996. However, as a percent of sales, there was an
increase from 16.4% in 1995 to 18.2% in 1996. Certain costs in this
category are of a fixed nature. Royalty and advertising expenses
were 2.1% of sales in 1996 and 1.4% in 1995 increasing by $823,000 in
1996. "Branded" product, for which royalty expense is recorded,
increased from 14.2% of sales in 1995 to 23.3% in 1996.
In 1995 the Company closed two manufacturing facilities which
completed the Company's program of reducing excess domestic
production capacity begun in 1991. 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 manufacturing equipment to estimated realizable value.
A portion of the Company's corporate office building in New York
is leased to third parties. Rental income (net of related expenses)
is classified separately.
Interest expense decreased by $908,000 from 1995. This decline
is the result of a lower level of borrowing during the year which
occurred from better management of receivables and inventory levels.
The effective tax rate increased to 31.6% in 1996 from a benefit
rate of 24.9% in 1995. The effective rate in 1995 was impacted by
the loss of certain future state tax benefits. The 1996 effective
rate is less than the statutory rate due primarily to the utilization
of certain carryover job tax credits and alternative minimum tax
carryovers.
Liquidity and Capital Resources
On May 3, 1996, the Company entered into a new credit facility
with BNY Financial Corporation, as Agent ("New Facility"). 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 $13,500,000 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 New 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. The New
Facility expires in May 1999.
The New Facility contains financial covenants, including but not
limited to, tangible net worth and interest coverage, limits fixed
asset purchases and does not allow for the payment of cash dividends.
The Company is not required to maintain compensating balances,
- -8-
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. As of December 27, 1997, the Company failed to
meet financial covenants relating to minimum tangible net worth,
fixed charge coverage ratio and minimum EBITDA. On February 25,1998,
the bank waived non compliance with respect to these provisions.
Outstanding borrowings under the New Facility amounted to
$5,108,000 at December 27, 1997 as compared to $400,000 in 1996. Net
working capital as of the end of 1997 was $40,648,000 as compared to
$40,158,000 in 1996. The working capital ratio as of the end of 1997
was 3.7:1 as compared to 4.5:1 in 1996.
During 1997, cash used in operations approximated $2,000,000
which primarily related to higher levels of accounts receivables. In
1996, cash provided by operations was approximately $22,000,000. In
1996, a significant reduction in inventory levels is the primary
reason for the generation of cash from operations.
Additions to plant, property and equipment, which represented
normal replacement and upgrading of equipment, were approximately
$1,000,000 in 1997 as compared to $600,000 in 1996. Capital
expenditures for 1998 are expected to be higher than 1997 and are
expected to be financed from operations.
The increase in other assets in 1997 is primarily due to
unamortized in-store fixture cost which are being amortized over 36
months.
In 1993, the Company entered into two joint ventures in Central
America for the purpose of producing apparel under the Caribbean
Basin Incentive program or as imports. Effective December 1, 1996,
the Company purchased the 50% ownership interest of its joint venture
partner in one of the ventures for $1,267,000. This entity has been
consolidated since the date of acquisition. This transaction
resulted in recording goodwill of $240,000 which is being amortized
over 10 years. The Company continues to maintain a 50% interest in
the other joint venture.
At December 27, 1997, the Company had unused lines of credit of
$11,215,000 for direct borrowings or the issuance of letters of
credit. This availability is in addition to the outstanding direct
borrowings of $5,108,000 and letters of credit of $33,402,000
outstanding at the end of 1997.
Management believes that the line of credit that is available
under the New Facility, together with the cash expected to be
provided from operations, is adequate to meet the Company's financing
needs for the foreseeable future.
The Company relies on various computer applications for the
operation of its business. Several current computer applications
could have a significant impact on the Company if not modified prior
to the year 2000. As part of an reengineering effort and a
conversion to a new computer system, the Company is converting all
business applications to new hardware and software. This conversion
will address all issues related to Year 2000 and is expected to be
completed in the early part of 1999. It is anticipated that the
expenditure for this effort will approximate $500,000 of which a
portion has already been spent in 1997. Management does not believe
that this will have a significant impact on the Company.
- -9-
New Financial Accounting Standards
During Fiscal 1997, the Financial Accounting Standards Board
issued the following accounting standards: Statement of Financial
Accounting Standards No. 130, "Reporting Comprehensive Income" (SFAS
No. 130), Statement of Financial Accounting Standards No. 131,
"Disclosures about Segments of an Enterprise and Related Information"
(SFAS No. 131) and Statement of Financial Accounting Standards No. 132
"Employers Disclosures about Pension and other Post retirement Benefit
Plans" (SFAS No. 132). The Company will adopt SFAS No. 130 and
SFAS No. 131 in the fiscal year beginning December 28, 1997. The
Company does not expect any material effect from adoption of these
statements.
- -10-
Forward-Looking Statements
This report contains forward-looking statements within the
meaning of Section 21E of the Securities Exchange Act of 1934 as
amended. As such, final results could differ from estimates or
expectations due to factors such as, information currently available
is preliminary and incomplete, government regulation and policies may
change from that anticipated in present business decisions, business
conditions in the retail environment and market prices for raw
materials may change to a degree that existing plans may have to be
substantially revised. For any of these factors, the Company claims
the protection of the safe harbor for forward-looking statements
contained in the Private Securities Litigation Reform Act of 1995, as
amended.
- -11-
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and Stockholders of Hampton Industries,
Inc.
We have audited the accompanying consolidated balance sheets of
Hampton Industries, Inc. and subsidiaries as of December 27, 1997 and
December 28, 1996, and the related consolidated statements of
operations, shareholders' equity and cash flows for the years ended
December 27, 1997, December 28, 1996 and December 30, 1995. Our
audits also included the financial statement schedule listed in the
index at Item 14 (a)(2). These financial statements and financial
statement schedule are the responsibility of the Company's
management. Our responsibility is to express an opinion on these
financial statements and financial statement schedule based on our
audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all
material respects, the financial position of Hampton Industries, Inc.
and subsidiaries as of December 27, 1997 and December 28, 1996, and
the results of their operations and their cash flows for the years
ended December 27, 1997, December 28, 1996 and December 30, 1995 in
conformity with generally accepted accounting principles. Also, in
our opinion, the financial statement schedule, when considered in
relation to the basic consolidated financial statements taken as a
whole, presents fairly in all material respects the information set
forth therein.
S\Deloitte Touche LLP
-----------------------
February 17, 1998 (February 25, 1998 as to Note E)
New York, New York
- -12-
<TABLE>
HAMPTON INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<CAPTION>
December December
27, 28,
1997 1996
----------- -----------
<S> <C> <C>
ASSETS
Current assets:
Cash $ 171,944 $ 310,520
Accounts receivable, less reserves
for doubtful accounts and customer
allowances of $2,304,000 in 1997
and $819,000 in 1996. 24,313,827 18,967,447
Inventories (Note B)<F1> 30,356,997 30,748,132
Deferred income tax
assets (Note D)<F2> 405,145 532,078
Refundable income taxes - 905,833
Other current assets 514,303 132,933
----------- -----------
Total current assets 55,762,216 51,596,943
Property, plant and equipment - net
(Notes C<F3> and E<F4>) 17,702,668 19,185,350
Assets held for disposal
- net (Note J)<F5> 1,200,387 1,200,684
Investments in and advances to
unconsolidated affiliates 703,155 823,771
Other assets 2,673,453 1,613,792
----------- -----------
$78,041,879 $74,420,540
=========== ===========
LIABILITIES AND STOCKHOLDERS'EQUITY
Current liabilities:
Notes payable - banks and current
maturities of long-term debt
(Note E)<F4> $ 5,701,573 $ 593,332
Accounts payable 5,642,107 8,412,730
Accrued liabilities (Note K)<F6> 3,702,083 2,432,776
Income taxes (Note D)<F2> 68,346 -
----------- -----------
Total current liabilities 15,114,109 11,438,838
Deferred income tax
liabilities (Note D)<F2> 996,793 1,034,519
Long-term debt (Note E)<F4> 4,110,015 5,102,991
Retirement plan
obligations (Note G)<F7> 3,913,480 4,024,561
----------- -----------
24,134,397 21,600,909
Commitments and
contingencies (Note E)<F4>
Stockholders' equity
(Notes E<F4> and F<F8>)
Common stock, $1 par value - authorized
10,000,000 shares; issued 5,192,254
shares 5,192,254 5,191,454
Additional paid-in capital 34,022,873 34,018,908
Retained earnings 19,569,699 18,486,613
----------- -----------
58,784,826 57,696,975
Less cost of common stock held in
treasury - 605,825 shares 4,877,344 4,877,344
----------- -----------
Total stockholders' equity 53,907,482 52,819,631
----------- -----------
$78,041,879 $74,420,540
=========== ===========
</TABLE>
See notes to consolidated financial statements.
- -13-
<TABLE>
HAMPTON INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<CAPTION>
YEAR ENDED
December 27, December 28, December 30,
1997 1996 1995
------------- ------------ ------------
<S> <C> <C> <C>
Net sales $163,040,212 $160,683,890 $184,592,840
Cost of products
sold (Note B)<F1> 125,966,826 125,703,090 153,418,347
------------- ------------ ------------
Gross margin 37,073,386 34,980,800 31,174,493
------------- ------------ ------------
Operating expenses (income):
Selling, general and
administrative 33,962,059 29,264,129 30,221,234
Provision for
restructuring cost
(Note J)<F5> - - 1,211,077
Equity in (earnings) loss
of unconsolidated
affiliate (164,633) 12,574 (116,618)
Rental income - net (935,216) (666,181) (632,869)
Loss (gain) on disposal of
fixed assets 64,279 (656,191) (683,102)
Other income - net (182,853) (108,638) (27,925)
------------ ------------ ------------
32,743,636 27,845,693 29,971,797
------------ ------------ ------------
Operating income 4,329,750 7,135,107 1,202,696
Interest expense 2,681,664 3,176,589 4,084,949
------------ ------------ ------------
Earnings (loss) before
provision (benefit) for
income tax 1,648,086 3,958,518 (2,882,253)
Provision (benefit) for income
tax (Note D)<F2>: 565,000 1,250,000 (718,400)
------------ ------------ ------------
Net earnings (loss) $ 1,083,086 $ 2,708,518 $(2,163,853)
============ ============ ============
Basic earnings (loss) per
common share $.24 $.59 $(.47)
=== === ====
Weighted average common shares
outstanding 4,586,029 4,585,629 4,585,629
======= ======= =======
Diluted earnings (loss) per
share $.23 $.58 $(.47)
=== === ====
Weighted average common shares
outstanding and common share
equivalents 4,661,846 4,595,215 4,585,629
======= ======= =======
</TABLE>
See notes to consolidated financial statements.
- -14-
<TABLE>
HAMPTON INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<CAPTION>
Additional
Common stock paid in Retained
Shares Amount capital earnings
--------- ----------- ------------------------
<S> <C> <C> <C> <C>
Balance, December 31, 1994 5,191,454 $5,191,454 $34,018,908 $17,941,948
Net loss (2,163,853)
--------- ----------- ------------------------
Balance, December 30, 1995 5,191,454 5,191,454 34,018,908 15,778,095
Net earnings 2,708,518
--------- ----------- ------------------------
Balance, December 28, 1996 5,191,454 5,191,454 34,018,908 18,486,613
Stock options exercised 800 800 3,965
Net earnings 1,083,086
--------- ----------- ------------------------
Balance, December 27, 1997 5,192,254 $ 5,192,254 $34,022,873 $19,569,699
========= =========== =========== ============
<CAPTION>
Treasury stock Total
at cost Stockholders'
Shares Amount Equity
--------- ------------- ------------
<S> <C> <C> <C>
Balance, December 31, 1994 (605,825) $(4,877,344) $52,274,966
Net loss (2,163,853)
----------------------- ------------
Balance, December 30, 1995 (605,825) (4,877,344) 50,111,113
Net earnings 2,708,518
----------------------- ------------
Balance, December 28, 1996 (605,825) (4,877,344) 52,819,631
Stock options exercised 4,765
Net earnings 1,083,086
--------- ------------- ------------
Balance, December 27, 1997 (605,825) $(4,877,344) $53,907,482
========= ============ ============
</TABLE>
See notes to consolidated financial statements.
- -15-
<TABLE>
HAMPTON INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>
Year Ended
December 27, December 28, December 30,
1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net earnings (loss) $ 1,083,086 $ 2,708,518 $(2,163,853)
Adjustments to reconcile net
earnings (loss) to net
cash (used in) provided by
operating activities:
Amortization 549,555 264,751 108,293
Depreciation 2,210,009 2,326,723 2,855,091
Deferred income taxes 89,207 660,742 (16,343)
LIFO debit (credit) 616,129 (737,743) (204,800)
Reserve for doubtful accounts
and allowances 1,030,000 (381,002) 1,210,678
Retirement plan obligations (111,081) (34,726) (132,503)
Loss (gain) on sale of fixed
assets 64,279 (656,191) (683,102)
Equity in (earnings) loss of
unconsolidated affiliates (164,633) 12,574 (116,618)
Provision for restructuring
costs - (587,000) 45,083
Changes in current assets and
current liabilities:
Accounts receivable (6,376,380) 3,756,816 (1,233,862)
Inventories on a FIFO basis (224,994) 16,348,512 (7,137,886)
Other current assets 524,463 259,986 (439,667)
Accounts payable (2,770,623) (2,550,235) 716,803
Accrued liabilities 1,269,308 729,867 (1,334,993)
Income taxes 68,346 (48,183) (1,066,987)
------------ ------------- ------------
NET CASH (USED IN) PROVIDED BY
OPERATIONS (2,143,329) 22,073,409 (9,594,666)
------------ ------------- ------------
INVESTING ACTIVITIES:
Additions to fixed assets (1,033,327) (582,009) (619,524)
Proceeds received from sale
of fixed assets 211,043 1,183,222 1,645,124
Decrease (increase) in
investments in and advances
to unconsolidated
subsidiaries 202,963 (185,835) (26,708)
Increase in other assets (1,495,957) (1,042,359) (34,791)
Joint venture purchase - (1,267,000) -
------------ ------------- ------------
NET CASH (USED IN) PROVIDED BY
INVESTING ACTIVITIES: (2,115,278) (1,893,981) 964,101
------------ ------------- ------------
FINANCING ACTIVITIES:
Additions to debt - Banks 4,708,597 - 48,295,000
Payments on debt - Banks (19,200,356) (39,380,000)
- Other (593,332) (1,020,534) (1,064,658)
Exercise of stock options 4,766 - -
------------ ------------- ------------
NET CASH PROVIDED BY (USED IN)
FINANCING ACTIVITIES 4,120,031 (20,220,890) 7,850,342
------------ ------------- ------------
DECREASE IN CASH (138,576) (41,462) (780,223)
CASH - BEGINNING OF PERIOD 310,520 351,982 1,132,205
------------ ------------- ------------
CASH - END OF PERIOD $ 171,944 $ 310,520 $ 351,982
========= ========== =========
Cash paid during the period
-Interest $ 2,480,000 $ 2,700,000 $ 3,901,000
========= ========= =========
-Income taxes $ 412,390 $ 1,485,000 $ 1,544,000
========= ========= =========
</TABLE>
See notes to consolidated financial statements.
- -16-
HAMPTON INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED
DECEMBER 27, 1997, DECEMBER 28, 1996 AND DECEMBER 30, 1995
A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Description of Business
The Company is engaged in the business of manufacturing and
selling wearing apparel. The products consist principally of men's
and boys' shirts and men's and women's sleepwear, which are produced
domestically and in Central America. In addition, sport and dress
shirts, sweaters, activewear, outerwear and swimtrunks, for both men
and boys are imported from unaffiliated sources located primarily in
the Far East.
Principles of Consolidation
The consolidated financial statements include the accounts of
the Company and its subsidiaries, all of which are wholly-owned. All
significant intercompany profits, transactions and balances have been
eliminated.
The Company has an investment in a 50% owned but not controlled
entity which is accounted for by the equity method.
Use of Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that effect the reported amounts of assets
and liabilities and disclosure of contingent assets and liabilities
at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results
could differ from those estimates.
Inventories
Inventories are carried at the lower of cost or market value.
As described in Note B<F1>, the cost of substantially all inventory
is determined by the last-in, first-out (LIFO) method.
Property, Plant and Equipment
Expenditures for buildings, equipment and improvements are
capitalized and depreciated or amortized on a straight-line basis
over their estimated useful lives. Estimated useful lives of assets
are based upon the following ranges: land improvements, 30 years,
buildings and leasehold improvements, 30 to 35 years, machinery and
equipment, 3 to 15 years and furniture and fixtures, 5 to 10 years.
In-Store Displays
The costs for in-store point of sale displays are borne by the
Company in whole or in part. Such costs are capitalized as other
assets and amortized over a thirty-six month period.
Deferred Financing Costs
The costs associated with obtaining the Company's New Credit
facility have been deferred and are being amortized over the term of
the agreement.
- -17-
Long-Lived Assets
Financial Accounting Standards Board Statement Number 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-
Lived Assets to Be Disposed Of" requires that they be segregated
and stated at the lower of the expected net realizable value or
cost. The carrying value of long-lived assets is periodically
reviewed to determine whether impairment exists. The review is
based on comparing the carrying amount of the asset to the
undiscounted estimated cash flows over the remaining useful lives.
No impairment is indicated as of December 31, 1997. The Company
has adopted this statement and the impact has not been significant.
Revenue Recognition
Sales are recognized upon shipment of product, which is when
title passes to the customer.
Income Taxes
Deferred income taxes are provided to reflect the tax effect of
temporary differences between financial statement income and taxable
income in accordance with the provisions of Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes".
Basic and Diluted Earnings (Loss) per Common Share
The Company has adopted the provisions of Statement of Financial
Accounting Standard No. 128 "Earnings per share" (the "Statement").
The Statement establishes standards for computing and presenting
earnings per share and applies to entities with publicly held common
stock or potential common stock such as employee stock options. The
Statement replaces the presentation of primary earnings per share
with a presentation of basic earnings per share and also requires,
among other things, dual presentation of basic and diluted earnings
per share for all entities with complex capital structures. Basic
earnings per share excludes dilution and is computed by dividing net
earnings (loss) by the weighted-average number of shares outstanding
for each period presented. Diluted earnings (loss) per share is
computed by dividing net earnings (loss) by the weighted average
number of shares outstanding plus dilutive potential common shares
which will result from the exercise of stock options. Prior periods
have been restated to reflect the requirements of the new statement.
<TABLE>
The following is a reconciliation of the weighted average shares
used in the computations of basic and dilutive earnings (loss) per
common shares:
<CAPTION>
1997 1996 1995
<S> <C> <C> <C>
Weighted average common shares
outstanding used for basic
earnings (loss) per share 4,586,029 4,585,629 4,585,629
Dilutive stock options 75,817 9,586 -
--------- --------- ---------
Weighted average common shares
outstanding used for
dilutive earnings (loss) per
share 4,661,846 4,595,215 4,585,629
======== ======== ========
</TABLE>
- -18-
Stock Options and Warrants
Financial Accounting Standards Board Statement Number 123,
"Accounting for Stock-Based Compensation" which encourages, but
does not require, companies to recognize compensation expense of
grants for stock, stock options and other equity instruments to
employees based on fair value. The Company has elected to continue
to follow the provisions of APB Opinion 25 and related
Interpretations in accounting for employee stock options.
Fair Value of Financial Instruments
For financial instruments including cash, accounts receivable
and payable, accruals, notes payable - banks and current maturities
of long-term debt, it was assumed that the carrying amount
approximated fair value because of their short maturity.
The carrying amount of the non-current portion of mortgage notes
due through the year 2000, all of which bear interest at floating
rates, are also assumed to approximate their fair values.
Investments In and Advances to Unconsolidated Affiliate
The investment in the remaining joint venture is carried on the
equity basis, which approximates the Company's equity in the
unconsolidated entity's underlying net book value. Advances due from
the unconsolidated entity were $284,130 and $478,764 at December 27,
1997 and December 28, 1996 respectively.
- -19-
<TABLE>
<F1>
B. INVENTORIES
<CAPTION>
1997 1996
<S> <C> <C>
Finished goods $21,731,568 $22,295,109
Work-in-process 4,215,569 3,840,966
Piece goods 3,926,422 3,734,936
Supplies and other 483,438 877,121
------------ -----------
$30,356,997 $30,748,132
========== ==========
</TABLE>
Principally all inventories are valued at the lower of last-in,
first-out (LIFO) cost or market. Information related to the first-
in, first-out (FIFO) method may be useful in comparing operating
results to those of companies not on the LIFO method. On a
supplemental basis, if inventories had been valued at the lower of
FIFO cost or market, inventories at December 27, 1997 and December
28, 1996 would have been approximately $35,300,000 and $35,100,000,
respectively. The LIFO valuation method had the effect of decreasing
net earnings by $404,900 ($.09 per share) in 1997, increasing net
earnings by $504,800 ($.11 per share) in 1996, and $153,800 ($.03 per
share) in 1995. Income realized as a result of inventory liquidation
was not significant in 1997, $668,200 ($.15 per share) in 1996 and
was not significant in 1995.
Inventory in transit of $4,675,046 in 1997 and $4,453,000 in
1996 are included in finished goods.
<TABLE>
<F3>
C. PROPERTY, PLANT AND EQUIPMENT
<CAPTION>
1997 1996
<S> <C> <C>
Land and land improvements $ 2,608,387 $ 2,851,282
Buildings and leasehold improvements 21,960,680 23,249,576
Machinery and equipment 17,120,832 15,247,345
Furniture and fixtures 1,388,575 1,411,016
------------- ------------
43,078,474 42,759,219
Less accumulated depreciation and
amortization 25,375,806 23,573,869
------------- ------------
$ 17,702,668 $ 19,185,350
========== ==========
</TABLE>
- -20-
<TABLE>
<F2>
D. INCOME TAXES
Components of income tax provision (benefit) reflected in the
consolidated statements of operations are as follows:
<CAPTION>
1997 1996 1995
<S> <C> <C> <C>
Current:
Federal $ 412,893 $ 491,700 $ (874,400)
State and local 62,900 97,600 172,300
----------- ----------- -----------
475,793 589,300 (702,100)
Deferred:
Federal 84,207 665,200 (132,800)
State and local 5,000 (4,500) 116,500
----------- ----------- -----------
89,207 660,700 ( 16,300)
----------- ----------- -----------
$ 565,000 $ 1,250,000 $ (718,400)
========== ========== ========
</TABLE>
The following is a reconciliation of the statutory federal
income tax rate applied to pre-tax accounting earnings (loss)
compared to the provision (benefit) for income tax in the
consolidated statements of operations:
<TABLE>
<CAPTION>
1997 1996 1995
<S> <C> <C> <C>
Income tax expense (benefit) at the
statutory rate $ 560,400 $ 1,345,900 $(980,000)
Increase (decrease) resulting from:
State and local income taxes,
net of federal income tax 29,800 61,400 190,600
Nontaxable foreign (income)
loss (56,000) - -
Utilization of jobs credit
carryovers - (216,100) -
Utilization of AMT credit
carryovers - 31,000 -
Prior year over accruals (82,400)
Other, net 30,800 110,200 71,000
--------- ------------ ----------
$ 565,000 $ 1,250,000 $(718,400)
========= ============ ==========
</TABLE>
- -21-
<TABLE>
The components of deferred taxes included in the balance sheet
as of December 27, 1997 and December 28, 1996 are as follows:
<CAPTION>
1997 1996
<S> <C> <C>
Deferred income tax assets:
Net operating loss carryforwards $ 548,912 $ 753,438
Restructuring costs - 104,607
Allowance for doubtful accounts 120,579 27,229
Inventory 250,975 251,843
Charitable contribution
carryforwards - 17,852
Other (12,807) (2,686)
---------- ----------
907,659 1,152,283
Valuation allowance (502,514) (620,206)
---------- ----------
$ 405,145 $ 532,077
========== ==========
Deferred income tax liabilities - net
Depreciation $ 2,668,151 $ 2,818,053
Deferred compensation (1,452,400) (1,573,704)
Trademarks (166,748) (156,922)
Equity in profit (loss) of joint
venture - (54,174)
Other (52,210) 1,252
----------- -----------
$ 996,793 $ 1,034,505
=========== ===========
</TABLE>
<TABLE>
Net operating loss carryforwards for state income tax purposes
expire as follows:
<CAPTION>
Year Amount
<S> <C>
1998 $2,647,122
1999 1,088,704
2000 3,544,119
2001 1,569,629
Thereafter 2,330,336
</TABLE>
- -22-
<TABLE>
<F4>
E. LONG TERM DEBT
<CAPTION>
1997 1996
<S> <C> <C>
Revolving credit facility (i)<F9> $5,108,241 $ 399,644
Capitalized lease obligations (ii)<F10> 1,583,347 1,916,679
Mortgage note, due quarterly to 2000 (ii)<F10> 3,120,000 3,380,000
---------- ----------
9,811,588 5,696,323
Less amount due in one year 5,701,573 593,332
---------- ----------
$4,110,015 $5,102,991
========== ==========
</TABLE>
<TABLE>
Annual maturities of debt are as follows:
<S> <C>
1998 _______ $ 5,701,573
1999 _______ 1,510,015
2000 _______ 2,600,000
$ 9,811,588
=========
</TABLE>
<F9>
(i) On May 3, 1996, the Company entered into a new credit
facility with BNY Financial Corporation, as Agent ("New Facility").
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 $13,500,000 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 New 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 the New
Facility expires in May 1999. The borrowings of $5,108,241
outstanding at December 27, 1997 have been classified as short term.
The New 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. As of December 27, 1997, the Company failed to meet financial
covenants relating to minimum tangible net worth, fixed charge
coverage ratio and minimum EBITDA. On February 25,1998, the bank
waived non compliance with respect to these provisions.
- -23-
<F10>
(ii) The mortgage notes and capitalized lease obligations are
collateralized by building and property having a carrying value at
December 27, 1997 of approximately $5,976,000. The effective interest
rate on the aggregate amount of capitalized leases at December 27, 1997
was 6.34%. The effective interest rate on the mortgage note due
in 2000 at December 27, 1997 was 7.87%.
At December 27, 1997, letters of credit amounting to
approximately $33,402,076 were outstanding which relate to purchase
commitments issued to foreign suppliers of approximately $40,289,775.
<F8>
F. STOCKHOLDERS' EQUITY
Preferred Stock
The Company has authorized 14,140.5 shares of $7 cumulative
First Preferred Stock, par value of $100, none of which is issued.
In addition, the Company has authorized 1,000,000 shares of
Second Preferred Stock, par value of $1, none of which has been
issued. The Board of Directors is authorized to fix designations,
relative rights, preferences and limitations on the stock at the time
of issuance.
Common Stock
In 1992, the stockholders approved a non-qualified stock option
plan (the "Plan") under which it has reserved 363,000 shares of
common stock and expires in 2002. The Plan was amended in 1997 to
increase the reserved shares of common stock to 963,000 shares and
the expiration date of 2002 was eliminated. 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 shares, whether
authorized but unissued or reacquired by the Company, of the common
stock of the Company.
<TABLE>
The exercise price of options is equal to the fair market value
on the date of each 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 during 1996 and 1997 is as
follows:
<CAPTION>
Price range Weighted
Number of per average
Shares Share price per share
<S> <C> <C> <C>
Outstanding at December 30,1995 0 - -
Granted 279,500 $4.50 $4.50
Exercised - - -
Canceled 4,500 $4.50 $4.50
---------
Outstanding at December 28, 1996 275,000 $4.50 $4.50
Granted 121,500 $6.75 - $9.50 $7.64
Exercised (800) $4.50 $4.50
Canceled (6,000) $4.50 - $6.75 $5.06
---------
Outstanding at December 27, 1997 389,700 $4.50 - $9.50 $5.47
======
</TABLE>
- -24-
As of December 27, 1997, 53,300 shares were exercisable.
<TABLE>
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 $234,300 in 1997 and
$490,100 in 1996 which would be expensed at the rate of 20% per annum
over the option's vesting period. The assumptions used in the
option-pricing model for 1997 and 1996, respectively, include a risk-
free interest rate of 5.8% and 6.7%, expected volatility of 33.1% and
39.3% and a life of 5 years. 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:
<CAPTION>
Fifty-two Fifty-two
Weeks Ended Weeks Ended
December 27, December 28,
1997 1996
<S> <C> <C>
Net income
- as reported $ 1,083,086 $ 2,708,518
========= =========
- pro forma $ 1,014,086 $ 2,670,038
========= =========
Basic net income per common share
- as reported $.24 $.59
=== ===
- pro forma $.22 $.58
=== ===
Diluted net income per common share
- as reported $.23 $.58
=== ===
- pro forma $.22 $.58
=== ===
</TABLE>
<F7>
G. PROFIT SHARING PLANS
On December 31, 1995, the Company merged two qualified profit
sharing plans into a single plan (the Plan) that is in compliance
with the regulations of the Internal Revenue Service Code for
qualification as a 401-K plan. The Plan covers all associates of the
Company. During 1996 and 1997, the Company made a matching
contribution of 40% of the deferral amount that the associates elect
to make (as limited by the Internal Revenue Service Code) and has set
the matching contribution rate for 1998 at 40%. The Company has the
option of changing the matching contribution each year, the right to
amend, modify or terminate the Plan. Company contributions to the
Plan were $362,000 for 1997 and $160,475 for 1996. Under the
predecessor plans, the Company contribution aggregated $248,000 for
1995.
- -25-
The Company also maintains a Supplemental Retirement Plan for
Key Employees (the Supplemental Plan) to permit certain key
associates to defer receipt of current compensation in order to
provide retirement and death benefits on behalf of such associates.
Company profit sharing credits are determined at the discretion of
the Board of Directors. Amounts of profit sharing credits are vested
in the same manner as vesting occurs under the Company's Qualified
Profit Sharing and Retirement Savings Plan. An annual return equal
to the Moody's AAA Corporate bond rate is added to each participant
deferred compensation account balance and employer profit sharing
credit account balance. The Company may provide supplemental profit
sharing credits to one or more active participants in the
Supplemental Plan, the amount of which shall be determined by the
Board of Directors in its sole and absolute discretion.
<TABLE>
As of January 1, 1996, the participants in this Supplemental
Plan were no longer able to make salaried deferrals. The Company
credited interest and profit sharing credits to the participants as
follows:
<CAPTION>
1997 1996 1995
<S> <C> <C> <C>
Interest $ 273,000 $ 287,000 $ 285,000
Profit sharing credits - - $ 137,000
</TABLE>
The Supplemental Plan is not intended to be a qualified plan
under the provisions of the Internal Revenue Code. It is intended to
be unfunded and, therefore, all compensation deferred under the
Supplemental Plan is held by the Company and commingled with its
general assets. However, in 1998, the Company purchased life
insurance policies on the lives of the participants of which it is
the beneficiary. It is the intention of the Company that
distributions under the Supplemental Plan will continue to be made
from general assets of the Company until such time that the cash
surrender value of these policies will provide the funding necessary
for the payment of future benefits to the participants.
Effective January 1, 1998, the Company instituted a Nonqualified
Deferred Compensation Plan for Key Employees (the Deferred Plan) to
permit certain key employees to defer receipt of current compensation
in order to provide retirement and death benefits on behalf of such
employees. The Company may provide a matching contribution to the
Deferred Plan. The Company may provide supplemental profit sharing
credits which are determined at the discretion of the Board of
Directors. Amounts of matching contributions and profit sharing
credits are vested in the same manner as vesting occurs under the
Company's Qualified Profit Sharing and Retirement Savings Plan. For
1998 the Company has established a matching rate of 20% of the
employees deferrals. The Deferred Plan is not intended to be a
qualified plan under the provisions of the Internal Revenue Code. It
is intended to be unfunded and, therefore, all compensation deferred
under the Deferred Plan is held by the Company and commingled with
its general assets. However, employee deferrals and the Company's
match are deposited each month in Company owned insurance contracts.
Within these contracts the employees have the option of selecting a
variety of investments. The return on these underlying investments
will determine the amount of earnings credit. The Company has the
option of changing the matching contribution each year, the right to
amend, modify or terminate the Deferred Plan.
- -26-
H. SELECTED QUARTERLY DATA (UNAUDITED)
<TABLE>
The following table sets forth selected quarterly financial
information for the fiscal years 1997 and 1996 (in thousands of
dollars, except per share amounts):
<CAPTION>
NET EARNINGS (LOSS)
BASIC DILUTED
NET GROSS PER PER
QUARTER ENDED SALES MARGIN AMOUNT SHARE SHARE
<S> <C> <C> <C> <C> <C>
3-29-97 $ 36,356 $ 8,940 $ 620 $ .14 $ .13
6-28-97 26,111 5,947 (1,184) (.26) (.26)
9-27-97 46,151 12,932 1,891 .41 .40
12-28-97 54,422 9,254 (244) (.05) (.05)
-------- -------- --------
Y E A R $163,040 $ 37,073 $ 1,083
======= ======= ======
</TABLE>
<TABLE>
<CAPTION>
NET EARNINGS (LOSS)
BASIC DILUTED
NET GROSS PER PER
QUARTER ENDED SALES MARGIN AMOUNT SHARE SHARE
<S> <C> <C> <C> <C> <C>
3-30-96 $ 35,936 $ 7,699 ($ 264) ($.06) ($.06)
6-29-96 25,295 4,567 (1,184) (.26) (.26)
9-28-96 54,226 13,030 2,718 .59 .59
12-28-96 45,227 9,685 1,439 .32 .32
-------- -------- --------
Y E A R $160,684 $ 34,981 $ 2,709
======= ======= ======
</TABLE>
I. CONCENTRATION OF CREDIT RISK
Trade receivables potentially subject the Company to credit
risk. The Company extends credit to its customers based upon an
evaluation of the customer's financial condition and credit history
and generally does not require collateral. The Company has
historically incurred minimal credit losses.
<TABLE>
The Company's broad range of customers includes many large
multi-outlet retail chains, two of which account for a significant
percentage of sales volume, as follows:
<CAPTION>
1997 1996 1995
<S> <C> <C> <C>
J.C. Penney Co., Inc. 16% 15% 16%
Wal-Mart Stores, Inc. 15% 16% 18%
</TABLE>
- -27-
<F5>
J. RESTRUCTURING COSTS
In 1995 the Company closed two manufacturing facilities which
completed the Company's program of reducing excess domestic
production capacity begun in 1991. The closing costs related thereto
are 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
manufacturing equipment to estimated realizable value.
<F6>
K. ACCRUED LIABILITIES
<TABLE>
Accrued liabilities consist of the following:
<CAPTION>
1997 1996
<S> <C> <C>
Accrued payroll $1,230,259 $1,369,818
Accrued expenses 2,264,405 626,700
Other 207,419 436,258
---------- ----------
$3,702,083 $2,432,776
========== ==========
</TABLE>
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None
- -28-
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
See "Election of Directors" on page 2 of the Proxy Statement for
Registrant's 1998 Annual Meeting of Shareholders, which information
is incorporated herein by reference. Also see information contained
under the caption "Executive Officers of Registrant" on page 2
hereof.
ITEM 11. EXECUTIVE COMPENSATION
See "Compensation of Officers and Directors" on page 4 of the
Registrant's 1998 Proxy Statement, which information is incorporated
herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
See "Voting Securities" on page 1 of the Registrant's 1998 Proxy
Statement, which information is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
See "Certain Transactions with Management" on page 9 of the
Registrant's 1998 Proxy Statement, which information is incorporated
herein by reference.
- -29-
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM
8-K
(A)1. Financial Statements
The following consolidated financial statements of Hampton
Industries, Inc. and its subsidiaries are included in Part II,
Item 8:
Independent Auditors' Report ____________________________________ 12
Consolidated balance sheets -
December 27, 1997 and December 28, 1996 ________________________ 13
Consolidated statements of operations -
years ended December 27, 1997, December 28, 1996 and
December 30, 1995 _____________________________________________ 14
Consolidated statements of stockholders' equity - years ended
December 27, 1997, December 28, 1996 and December 30, 1995 ____ 15
Consolidated statements of cash flows - years ended December 27,
1997, December 28, 1996 and December 30, 1995 _________________ 16
Notes to consolidated financial statements ___________________ 17-28
(a)2. Financial Statement Schedule
Schedule II - Valuation and qualifying accounts _________________ 31
All other schedules have been omitted because they are
inapplicable or not required, or the information is included
elsewhere in the financial statements or notes thereto.
(a)3. Exhibits
Exhibit No. 21 - Subsidiaries of the Company ____________________ 32
(b) Reports on Form 8-K
None
- -30-
<TABLE>
HAMPTON INDUSTRIES, INC.
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
<CAPTION>
Balance at Charged to Charged
beginning costs and to
of period expenses other
Description accounts
----------------------------- ---------- ---------- -------
<S> <C> <C> <C> <C>
RESERVE FOR DOUBTFUL ACCOUNTS
AND CUSTOMER ALLOWANCES:
Year ended December 27, 1997 $ 819,000 $1,470,531 $57,305 (A)<F11>
======== ========= =======
Year ended December 28, 1996 $1,200,000 $ 393,465 $ 7,183 (A)<F11>
======== ========= =======
Year ended December 30, 1995 $1,238,000 $1,210,678 - (A)<F11>
======== ========= =======
</TABLE>
NOTES:
<F11>
(A) Recoveries of accounts previously written off.
<F12>
(B) Uncollectible accounts written off.
<TABLE>
<CAPTION>
Balance at
end
Description Deductions of period
---------------------------- ---------- -------------
<S> <C> <C> <C> <C>
RESERVE FOR DOUBTFUL
ACCOUNTS AND CUSTOMER
ALLOWANCES:
Year ended December 27, 1997 (A)<F11> $ 42,836 (B)<F12> $ 2,304,000
========= =========
Year ended December 28, 1996 (A)<F11> $ 781,648 (B)<F12> $ 819,000
========= =========
Year ended December 30, 1995 (A)<F11> $1,248,678 (B)<F12> $ 1,200,000
========= =========
</TABLE>
NOTES:
<F11>
(A) Recoveries of accounts previously written off.
<F12>
(B) Uncollectible accounts written off.
- -31-
Exhibit 21
HAMPTON INDUSTRIES, INC.
Subsidiaries
Name State of Incorporation
Hamptex, Inc. North Carolina
IGM CORP., S.A. DE C.V. El Salvador
Hampton owns 100% of the outstanding stock of each subsidiary
and they are included in the consolidated financial statements.
- -32-
SIGNATURES
Pursuant to requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, Hampton Industries, Inc. has duly
caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
HAMPTON INDUSTRIES, INC.
S/DAVID FUCHS
_____________________________________
David Fuchs, Chairman and Director
S/STEVEN FUCHS
_____________________________________
Steven Fuchs, President and Director
S/ROBERT J. STIEHL, JR.
_____________________________________
Robert J. Stiehl, Jr., Executive Vice
President - Operations and Treasurer
S/FRANK E. SIMMS
_____________________________________
Frank E. Simms, Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of
1934, this report had been signed below by the following persons on
behalf of the Company and in the capacities and on the dates
indicated:
S/HERBERT L. ASH S/SOL SCHECHTER
______________________________ ____________________________
Herrbert L. Ash, March 10, 1998 Sol Schechter,March 10, 1998
(Director) (Director)
S/PAUL CHUSED
_______________________________
Paul Chused, March 10, 1998
(Director)
The Company's annual report to stockholders and proxy material
is to be furnished to its security holders subsequent to the filing
of the annual report on this form. Copies of such material will be
furnished to the Commission when it is sent to security holders.
- -33-
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-27-1997
<PERIOD-END> DEC-27-1997
<CASH> 171,944
<SECURITIES> 0
<RECEIVABLES> 24,313,827
<ALLOWANCES> 0
<INVENTORY> 30,356,997
<CURRENT-ASSETS> 514,303
<PP&E> 17,702,668
<DEPRECIATION> 0
<TOTAL-ASSETS> 78,041,879
<CURRENT-LIABILITIES> 15,114,109
<BONDS> 0
0
0
<COMMON> 5,192,254
<OTHER-SE> 43,837,884
<TOTAL-LIABILITY-AND-EQUITY> 78,041,879
<SALES> 163,040,212
<TOTAL-REVENUES> 163,040,212
<CGS> 126,582,955
<TOTAL-COSTS> 126,582,955
<OTHER-EXPENSES> 32,743,636
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,681,664
<INCOME-PRETAX> 1,648,086
<INCOME-TAX> 565,000
<INCOME-CONTINUING> 1,083,086
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,083,086
<EPS-PRIMARY> .24
<EPS-DILUTED> .23
</TABLE>
