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 April 1, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________________ to ___________________
Commission file number 1-6105
Hampton Industries, Inc.
(Exact name of registrant as specified in its charter)
North Carolina 56-0482565
(State or other jurisdiction of (I. R. S. Employer
incorporation or organization) Identification No.)
2000 Greenville Hwy., P. O. Box 614, Kinston, NC 28502-0614
(Address of principal executive offices) (ZIP Code)
Registrant's telephone number, including area code: (252) 527-8011
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
Common Stock $1.00 par value per share American Stock Exchange
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 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 May 12, 2000 there were 5,553,374 shares of common stock
outstanding.
<TABLE>
HAMPTON INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<CAPTION>
April 1, March 27, January 1,
2000 1999 2000
----------- ----------- ----------
(Unaudited) (Unaudited)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash $ 714,048 $ 182,019 $ 627,179
Accounts receivable - net 35,560,462 26,998,328 32,229,509
Inventories 57,348,093 45,779,074 54,714,782
Income tax receivable 1,181,132 - 1,181,132
Deferred income tax assets 3,758,718 361,062 3,048,718
Other current assets 690,021 1,199,055 848,335
------------ ----------- ------------
Total current assets 99,252,474 74,519,538 92,649,655
Property, plant and equipment - net 19,323,631 20,217,326 18,901,529
Assets held for disposal - net 1,842,389 566,849 1,842,389
Investments in and advances to
unconsolidated affiliates 791,311 849,820 711,084
Other assets 3,867,328 2,371,833 4,030,178
------------ ----------- ------------
$125,077,133 $98,525,366 $118,134,835
============ =========== ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable - banks and current
maturities of long-term debt $ 44,300,576 $12,195,632 $ 35,269,433
Uncleared Checks 2,204,835 720,705 2,910,146
Accounts payable 7,574,835 7,896,148 5,996,976
Accrued liabilities 3,168,035 2,297,434 4,408,307
Income taxes - - 67,480
------------ ----------- ------------
Total current liabilities 57,248,281 23,109,919 48,652,342
Deferred income tax liabilities 2,721,283 1,401,916 2,721,283
Long-term debt 11,142,127 14,302,420 11,201,058
Retirement plan obligations 3,551,752 3,876,536 3,975,382
------------ ----------- ------------
74,663,443 42,690,791 66,550,065
Stockholders' equity 50,413,690 55,834,575 51,584,770
------------ ----------- ------------
$125,077,133 $98,525,366 $118,134,835
============ =========== ============
</TABLE>
Note: The consolidated balance sheet at January 1, 2000 has been taken from
the audited financial statements and condensed.
See notes to consolidated financial statements.
- -1-
<TABLE>
HAMPTON INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<CAPTION>
Thirteen Weeks Ended
--------------------------------
April 1, March 27,
2000 1999
------------ ------------
<S> <C> <C>
Net sales $ 42,929,621 $ 36,913,631
Cost of products sold 32,228,648 26,713,606
------------ ------------
Gross margin 10,700,973 10,200,025
------------ ------------
Selling, general and administrative 11,692,413 10,604,979
Equity in earnings of unconsolidated
affiliates (24,453) (28,175)
------------ ------------
Operating loss (966,987) (376,779)
------------ ------------
Other (income) expense:
Rental income (264,873) (266,786)
(Gain) loss on disposal
of fixed assets (45,295) 46,886
Other expense (income)- net 24,256 (48,925)
Interest expense 1,200,005 736,137
------------ ------------
914,093 (467,312)
------------ ------------
Loss before income tax benefit (1,881,080) (844,091)
Income tax benefit (710,000) (337,000)
------------ ------------
Net loss $ (1,171,080) $ (507,091)
============ ============
Basic loss per common share $(.21) $(.09)
====== ======
Weighted average common shares
outstanding 5,553,374 5,553,374
========== ==========
Diluted loss per share* $(.21) $(.09)
====== ======
Weighted average common shares
outstanding and other potential
common shares * 5,553,374 5,553,374
========== ==========
</TABLE>
*Diluted loss per common share equivalents have been excluded because they
are anti-dilutive.
See notes to consolidated financial statements
- -2-
<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 January 1, 2000 6,286,419 $6,286,419 $39,148,350 $11,027,346
Net Loss (1,171,080)
---------- ---------- ----------- -----------
Balance April 1, 2000 6,286,419 $6,286,419 $39,148,350 $ 9,856,266
========== ========== =========== ===========
<CAPTION>
Total
Treasury Stock at Cost Stockholders
Shares Amount Equity
---------- ---------- -----------
<S> <C> <C> <C>
Balance January 1, 2000 733,045 $4,877,344 $51,584,770
Net Loss (1,171,080)
---------- ---------- -----------
Balance April 1, 2000 733,045 $4,877,344 $50,413,690
========== ========== ===========
</TABLE>
See notes to consolidated financial statements
- -3-
<TABLE>
HAMPTON INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>
Thirteen Weeks Ended
-----------------------------
April 1, March 27,
2000 1999
------------ ------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net loss $ (1,171,080) $ (507,091)
Adjustments to reconcile net loss to
net cash used in operating activities:
Amortization 248,433 201,511
Depreciation 608,613 496,255
Deferred income tax (710,000) -
Reserve for doubtful accounts and
allowances (2,671,000) (660,000)
Retirement plan obligations (423,630) (112,311)
(Gain) loss on sale of fixed assets (45,295) 46,886
Equity in earnings of unconsolidated
affiliates (24,453) (28,175)
Changes in current assets and current
liabilities:
Accounts receivable (659,953) 5,984,627
Inventories (2,633,311) (10,185,603)
Other current assets 158,315 (254,103)
Uncleared Checks (705,311) (1,389,444)
Accounts payable 1,577,859 1,731,711
Accrued liabilities (1,240,272) (1,237,889)
Income taxes (67,480) (35,050)
------------ ------------
NET CASH USED IN OPERATING ACTIVITIES (7,758,567) (5,948,676)
------------ ------------
INVESTING ACTIVITIES:
Additions to fixed assets (607,502) (307,366)
Additions to software (18,359) (582,448)
Additions to building (410,653) (10,000)
Proceeds from sale of fixed assets 51,095 6,198
Increase in investments in and advances
to unconsolidated affiliates (55,774) (60,261)
Increase in other assets (85,583) (470,335)
------------ ------------
NET CASH USED IN INVESTING ACTIVITIES: (1,126,776) (1,424,212)
------------ ------------
FINANCING ACTIVITIES:
Additions to debt - Credit facility 9,038,274 7,420,865
Payments on debt - Mortgage (38,209) (148,333)
Payments on debt - Long-term debt (27,854) -
------------ ------------
NET CASH PROVIDED BY FINANCING ACTIVITIES: 8,972,211 7,272,532
------------ ------------
INCREASE (DECREASE) IN CASH 86,868 (100,356)
CASH AT BEGINNING OF PERIOD 627,179 282,375
------------ ------------
CASH AT END OF PERIOD $ 714,048 $ 182,019
============ ============
SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid during the period - Interest $ 891,043 $ 720,593
============ ============
- Income taxes $ 84,105 $ 35,050
============ ============
</TABLE>
See notes to consolidated financial statements.
- -4-
HAMPTON INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information as of April 1, 2000 and March 27, 1999 is unaudited.)
1. BASIS OF PRESENTATION
The consolidated balance sheets as of April 1, 2000 and March 27, 1999
and the consolidated statements of operations and cash flows 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
April 1, 2000 and March 27, 1999 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 January 1, 2000 Annual Report to
shareholders. The results of operations for the period ended April 1, 2000
are not necessarily indicative of the operating results for the
full year.
Certain reclassifications have been made to the consolidated
financial statements of March 27, 1999 to conform to classifications used
at April 1, 2000.
2. CREDIT FACILITY
On May 5, 1999, the Company entered into a new credit facility
with The Chase Manhattan Bank, as Agent ("The Facility"). The
Facility provides for a maximum line of credit of $80,000,000, which
includes both direct loans and letters of credit. The initial
proceeds of The Facility were used to repay the outstanding
indebtedness under the Company's previously existing bank line of
credit.
Availability under The Facility is based on a formula of eligible
accounts receivable and eligible inventory, determined monthly, and
provides for a seasonal over-advance of up to $10,000,000 within the
$80,000,000 maximum line of credit. Direct borrowings bear interest
at the London Interbank Offered Rate plus the applicable margin (as
defined in The Facility) or the Prime Rate plus .75%, at the option of
the Company. The applicable margin is determined by a ratio of
adjusted E.I.B.I.T.A. to interest expense. Borrowings are
collateralized by accounts receivable, inventory and general
intangibles of the Company and its subsidiaries. The Facility
expires in May 2002.
The Facility contains financial covenants relating to minimum
levels of net income, interest coverage, capital expenditures,
leverage, 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 .50 of 1% per annum on the unused portion
of the total facility plus certain other administrative costs.
Outstanding borrowings under the current facility amounted to
$44,050,000 at April 1, 2000 as compared to $22,129,000 at the same
time in 1999, under the previous facility agreement. Net working
capital at April 1, 2000 was $42,004,000 as compared to $51,410,000 in
1999. The working capital ratio as of April 1, 2000 was 1.7:1 as
compared to 3.2:1 at the same time in 1999.
- -5-
3. STOCKHOLDERS' EQUITY
The Board of Directors declared a 10% stock dividend in 1999.
The dividends were payable on July 2nd to stockholders of
record on June 2nd. Basic and diluted (loss) earnings per share have
been restated for all periods presented to reflect the stock dividends.
Stock options have also been restated to reflect the stock dividends.
4. STOCK OPTIONS
The Company has a non-qualified stock option plan (the "Plan")
under which there are presently reserved 1,165,230 shares of common
stock. A committee designated by the Board of Directors administers
the Plan. 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 common stock of the Company. 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 1999 and 2000 is as follows:
<TABLE>
<CAPTION>
Number Weighted
of Price Range Average Price
Shares per Share per Share
------- ------------- -----------
<S> <C> <C> <C>
Outstanding at December 26, 1998 843,612 $3.72 - $7.64 $5.21
Granted 34,950 $4.13 - $4.20 $4.14
Exercised - $0.00 $0.00
Canceled (153,142) $3.72 - $7.23 $5.14
-------- ------------- -----
Outstanding at January 1, 2000 725,420 $3.72 - $7.64 $5.17
Granted 10,000 $2.44 $2.44
Exercised - $0.00 $0.00
Canceled (25,773) $3.72 - $5.99 $4.23
-------- ------------- ------
Outstanding April 1, 2000 709,647 $2.44 - $7.64 $5.16
======== ============= ======
</TABLE>
As of April 1, 2000, there were 263,538 shares exercisable
- -6-
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 are exercised. 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 $1,659,300 for the grants prior
to 1999, and $10,100 for the 2000 grants. These amounts would be
expensed at the rate of 20% per annum over the options' vesting
period. The assumptions used in the option-pricing model includes
risk-free interest rates from 5.5% to 6.7%, expected volatility of
30.9% to 52.6% and a 5 year expected life. The pro forma impact of
following the provisions of FASB Statement 123 on the Company's
operations and (loss) income per share would be as follows:
<TABLE>
<CAPTION>
Thirteen Weeks Ended Thirteen Weeks Ended
April 1, 2000 March 27,1999
------------- --------------
<S> <C> <C>
Net loss - as reported ($1,171,080) ($507,091)
========== ========
- pro forma ($1,206,413) ($553,576)
========== ========
Basic loss per common share
- as reported ($0.21) ($0.09)
===== =====
- pro forma ($0.22) ($0.10)
===== =====
Diluted loss per common share
- as reported ($0.21) ($0.09)
===== =====
- pro forma ($0.22) ($0.10)
===== =====
</TABLE>
- -7-
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Restructuring Charge
In November of 1999, the Board of Directors of the Company
approved a restructuring plan that resulted in the announcement to
close two domestic sewing factories located in Warrenton, NC, and
Martinsville, VA, leaving one remaining factory in Washington, NC.
These closures were due to an increasing shift to sales of branded
product, which is primarily imported. The closure in Martinsville was
completed in December 1999, and the Warrenton closure was completed in
March 2000. This plan also included the elimination of certain
positions within the selling and administrative functions of the
Company. The restructuring charge amounted to $936,000, which
includes only the direct termination benefits along with the related
fringe benefits. This plan resulted in the reduction of approximately
298 full time associates or 30% of the domestic work force. This plan
was completed during the first quarter of 2000. The two properties
affected by this closure are classified as "Assets held for resale" on
the Balance Sheet and are being actively marketed by Management. In
addition, this plan included the decision to no longer offer for sale
the ladies sleepwear product line. This product line was primarily
private label and was the only ladies offerings by the Company.
<TABLE>
Following is a summary of the restructuring charges and reserves:
<CAPTION>
Severance and other
Employee costs
-------------------
<S> <C>
Restructuring charges at November 1999 $935,627
Cash payments in 1999 224,357
--------
Restructuring reserves at January 1, 2000 711,270
Cash payments in 2000 520,064
--------
Restructuring reserve at April 1, 2000 $191,206
========
</TABLE>
- -8-
Results of Operations
<TABLE>
The following table summarizes the operating data for the periods
indicated:
<CAPTION>
Thirteen Weeks Ended
----------------------
April 1, March 27,
2000 1999
------- -------
<S> <C> <C>
Net sales 100.0% 100.0%
Cost of products sold 75.1 72.4
------- -------
Gross margin 24.9 27.6
Selling, general and administrative 27.2 28.7
Equity in earnings of unconsolidated
affiliates (.1) (.1)
------- --------
Operating loss (2.2) (1.0)
Other (income) expense :
Rental income - net (.6) (.7)
(Gain) loss on disposal of fixed assets (.1) .1
Other expense (income)- net .1 (.1)
Interest expense 2.8 2.0
------- --------
Loss before income tax benefit (4.4) (2.3)
------- --------
Net loss (2.7)% (1.4)%
======= ========
</TABLE>
THIRTEEN WEEKS ENDED APRIL 1, 2000 AS COMPARED TO
THE THIRTEEN WEEKS ENDED MARCH 27,1999
Net sales increased by $6,016,000 or 16.3% for the quarter. Sales
of branded product increased by $7,181,000 to 65.9% of total sales
from 57.9% of total sales in the 1999 quarter. Sales of Nautica, Joe
Boxer, Dickies, and Rawlings were the principal contributors to the
increased sales volume. Non branded product accounted for a sales
decrease of $1,165,000 for the first quarter as compared to the prior
year.
Gross profit increased in absolute dollars by $501,000 during the
quarter ended April 1, 2000. As a percent of sales, gross margin
percent decreased to 24.9% from 27.6% in the prior period. A factor
causing this decrease was the liquidation of excess inventory from
1999. In addition, sales returns and allowances increased by
$1,535,000.
Selling, general and administrative expenses increased by
$1,087,000 or 10.3% during the quarter ended April 1, 2000, as
compared to the prior year. Increases in royalty expenses of
$445,000, compensation of $291,000 and amortization of $190,000 are
the primary factors accounting for this increase. As a percent of
sales, selling and general and administrative expenses decreased to
27.2% from 28.7% in the 1999 period.
Operating loss before income taxes increased from $377,000 in the
prior period to $967,000 for the thirteen weeks ended April 1, 2000.
Interest expense increased by $464,000 in the current quarter
principally due to higher borrowing in 2000 to support higher
inventory and customer receivable levels.
- -9-
Liquidity and Capital Resources
On May 5, 1999, the Company entered into a new credit
facility with The Chase Manhattan Bank, as Agent ("The Facility").
The Facility provides for a maximum line of credit of $80,000,000,
which includes both direct loans and letters of credit. The initial
proceeds of The Facility were used to repay the outstanding
indebtedness under the Company's previously existing bank line of
credit.
Availability under The Facility is based on a formula of
eligible accounts receivable and eligible inventory, determined
monthly, and provides for a seasonal over-advance of up to $10,000,000
within the $80,000,000 maximum line of credit. Direct borrowings bear
interest at the London Interbank Offered Rate plus the applicable
margin (as defined in The Facility) or the Prime Rate plus .75%, at
the option of the Company. The applicable margin is determined by a
ratio of adjusted E.I.B.I.T.A. to interest expense. Borrowings are
collateralized by accounts receivable, inventory and general
intangibles of the Company and its subsidiaries. The Facility
expires in May 2002.
The Facility contains financial covenants relating to minimum
levels of net income, interest coverage, capital expenditures,
leverage, 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 .50 of 1% per annum on the unused portion
of the total facility plus certain other administrative costs.
Outstanding borrowings under The Facility amounted to
$44,050,000 at April 1, 2000 as compared to $22,129,000 at the same
time in 1999, under the previous facility. Net working capital at
April 1, 2000 was $42,004,000 as compared to $51,410,000 in 1999. The
working capital ratio as of April 1, 2000 was 1.7:1 as compared to
3.2:1 at the same time in 1999
Net cash used in operating activities amounted to $7,759,000 for
the thirteen week period ended April 1, 2000. Cash used in operating
activities relates principally to an increase in reserve for doubtful
accounts and allowances, inventories, and accrued liabilities of
$2,671,000, $2,633,000 and $1,240,000 respectively. The increases
were offset by declines in accounts payable of $1,578,000. Cash used
in operating activities in the comparable prior-year period amounted
to $5,949,000 and relates primarily to an increase in inventories of
$10,186,000 which was offset by an decline in accounts receivable of
$5,985,000.
Net cash used in investing activities in the current thirteen
week period ended April 1, 2000 was $1,127,000. This amount
principally consists of additions to fixed assets of $1,037,000. Net
cash used in investing activities for the comparable prior year period
amounted to $1,424,000 which consisted principally of additions to
fixed assets of $900,000.
Net cash provided by financing activities in the current thirteen
week period ended April 1, 2000 was $8,972,000. This amount
principally consists of increased bank debt of $9,038,000. Net cash
provided by financing activities for the prior years comparable period
amounted to $7,273,000 and principally consists of increased bank debt
of $7,421,000.
The Company's backlog of orders plus shipments through May 6, 2000
was approximately $168,130,000 as compared to $146,425,000
(excluding the ladies product line for both periods) at the same time
in the prior year. Management believes that the sales to date, the
order backlog and anticipated new orders will be sufficient to meet
the Company's 2000 sales goals.
- -10-
Management believes that the credit available under the Credit
Facility together with the cash expected to be generated from
operations, will be adequate to support the Company's operating
requirements for the foreseeable future.
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 January 1, 2000.
- -11-
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/FRANK E. SIMMS
_____________________________________
Frank E. Simms, Chief Financial Officer
Date: May 12, 2000
- -12-
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-30-2000
<PERIOD-END> APR-01-2000
<CASH> 714,048
<SECURITIES> 0
<RECEIVABLES> 35,560,462
<ALLOWANCES> 0
<INVENTORY> 57,348,093
<CURRENT-ASSETS> 99,252,474
<PP&E> 19,323,631
<DEPRECIATION> 0
<TOTAL-ASSETS> 125,077,133
<CURRENT-LIABILITIES> 57,248,281
<BONDS> 0
5,553,374
0
<COMMON> 0
<OTHER-SE> 49,737,660
<TOTAL-LIABILITY-AND-EQUITY> 125,077,133
<SALES> 42,929,621
<TOTAL-REVENUES> 42,929,621
<CGS> 32,228,648
<TOTAL-COSTS> 32,228,648
<OTHER-EXPENSES> 11,382,048
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,200,005
<INCOME-PRETAX> (1,881,080)
<INCOME-TAX> (710,000)
<INCOME-CONTINUING> (1,171,080)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,171,080)
<EPS-BASIC> (0.21)
<EPS-DILUTED> (0.21)
</TABLE>
