<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1995
--------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
--------------- --------------
Commission file number 1-8176
------
LITTLEFIELD, ADAMS & COMPANY
- - ------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
New Jersey #22-1469846
- - ------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
253 North First Avenue, Sturgeon Bay, Wisconsin 54235-2551
- - ------------------------------------------------------------------------------
(Address of principal executive offices, and Zip Code)
Registrant's telephone number, including area code (414) 743-8743
--------------
- - ------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed
since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by 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 NO X
----- -----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at March 31, 1995
----- -----------------------------
Common Stock, par value 2,277,267 shares
$1.00 per share
<PAGE> 2
LITTLEFIELD, ADAMS & COMPANY
INDEX
<TABLE>
<CAPTION>
Page No.
--------
<S> <C> <C>
Part I. Financial Information
Item 1. Financial Statements
Report of Independent Accountants 3
Consolidated Balance Sheets-
March 31, 1995 and December 31, 1994 4
Consolidated Statements of Operations -
for the three months ended
March 31, 1995 and 1994 5
Consolidated Statements of Cash Flow -
for the three months ended
March 31, 1995 and 1994 6
Notes to Consolidated Financial Statements 7
Item 2. Management Discussion and Analysis of
Financial Condition and Results of Operations 15
Part II. Other Information
Item 1. Legal Proceedings 18
Item 4 Submission of Matters to a Vote of
Security Holders 18
Item 6. Exhibits and Reports on Form 8-K 18
Signatures 19
</TABLE>
Littlefield, Adams & Company, March 31, 1995 Form 10-Q; Page 2
<PAGE> 3
ARTHUR ANDERSEN LLP
Report of Independent Public Accountants
To the Board of Directors and Shareholders of
Littlefield, Adams & Company:
We have reviewed the accompanying consolidated balance sheet of Littlefield,
Adams & Company (a New Jersey corporation) and subsidiaries (the Company) as of
March 31, 1995, and the related consolidated statements of income and cash
flows for the three-month period ended March 31, 1995. These financial
statements are the responsibility of the Company's management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted
in accordance with generally accepted auditing standards, the objective of
which is the expression of an opinion regarding the financial statements taken
as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the financial statements referred to above for them to be in
conformity with generally accepted accounting principles.
/S/ ARTHUR ANDERSEN LLP /S/
---------------------------
Arthur Andersen LLP
San Antonio, Texas
May 9, 1995
Littlefield, Adams & Company, March 31, 1995 Form 10-Q; Page 3
<PAGE> 4
LITTLE, ADAMS & COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
(Unaudited)
March 31, December 31,
1995 1994
---------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Current assets:
Cash $ 105 $ 221
Accounts receivable:
Trade, less allowance of $315 at 3/31/95
and $329 at 12/31/94 3,444 2,792
Affiliates 150 150
Other 238 238
Inventories 4,097 3,624
Prepaid expenses and other current assets 247 275
---------- ---------
Total current assets 8,281 7,300
Property, plant and equipment, net 1,328 1,254
Goodwill - net 580 599
Notes receivable and other assets 72 79
---------- ---------
TOTAL ASSETS $ 10,261 $ 9,232
========== =========
LIABILITIES AND SHAREHOLDERS' INVESTMENT
Current liabilities:
Accounts payable $ 2,310 $ 2,147
Accrued expenses 2,056 2,579
Notes payable 6 10
Revolving lines of credit 2,361 1,136
Current portion of long-term debt 504 523
---------- ---------
Total current liabilities 7,237 6,395
Creditors' debt settlement 138 205
Long-term debt, less current portion 19 14
Deferred compensation 47 46
Class action settlement payable in common stock 1,400 1,400
Commitments & contingencies -- --
Shareholders' investment:
Common stock, $1.00 par; authorized 25,000,000;
issued 2,296,145 for 1995 and 2,371,145 for 1994;
outstanding 2,277,267 for 1995 and 1994. 2,296 2,371
Capital in excess of par value 5,549 5,474
Accumulated deficit (6,335) (6,583)
---------- ---------
1,510 1,262
Treasury stock, at cost - shares of 18,878
for 1995 and 1994. (90) (90)
---------- ---------
1,420 1,172
---------- ---------
TOTAL LIABILITIES AND SHAREHOLDERS' INVESTMENT $ 10,261 $ 9,232
========== =========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
Littlefield, Adams & Company, March 31, 1995 Form 10-Q; Page 4
<PAGE> 5
LITTLE, ADAMS & COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
For the 3 months ended March 31,
---------------------------------------
1995 1994
------------ --------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Revenues:
Net product sales $ 5,472 $ 5,535
Other revenues 108 61
------------ --------------
Total revenues 5,580 5,596
Costs & expenses:
Cost of products sold 3,382 3,945
Selling & administrative 1,760 1,590
------------ --------------
Total costs and expenses 5,142 5,535
------------ --------------
Income from operations 438 61
Other expense:
Interest (69) (96)
------------ --------------
Income (loss) before provision for income taxes 369 (35)
Provision for income taxes 121 21
------------ --------------
Net income (loss) $ 248 $ (56)
============ ==============
Weighted average common shares outstanding 2,277,267 2,206,871
============ ==============
Net income (loss) per share $ 0.11 $ (0.03)
============ ==============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
Littlefield, Adams & Company, March 31, 1995 Form 10-Q; Page 5
<PAGE> 6
LITTLE, ADAMS & COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
For the 3 months ended March 31,
----------------------------------
1995 1994
----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 248 $ (56)
Adjustments to reconcile net income (loss) to
net cash used in operating activities:
Depreciation and amortization 125 74
Changes in operating assets and liabilities:
Accounts and notes receivable, net (652) (310)
Inventories, net (473) 84
Prepaid expenses and other current assets 14 54
Accounts payable 163 (13)
Accrued expenses and other (523) 113
----------- -----------
Net cash used in operating activities (1,098) (54)
Cash flows from investing activities:
Purchase of property, plant, and equipment (145) (111)
(Increase) decrease in notes receivable and other
assets (5) 80
----------- -----------
Net cash used in investing activities (150) (31)
Cash flows from financing activities:
Decrease in bank overdraft -- (24)
Proceeds from line of credit and short term
borrowings 6,025 5,416
Repayments of line of credit and short term
borrowings (4,799) (5,181)
Payment on creditors' settlement debt (67) (67)
Proceeds from bank and other notes payable -- 36
Repayment of bank and other notes payable (27) (19)
----------- -----------
Net cash provided by financing activities 1,132 161
----------- -----------
Net increase (decrease) in cash (116) 76
Cash at beginning of period 221 --
----------- -----------
Cash at end of period $ 105 $ 76
=========== ===========
Supplemental disclosures of cash flows Information:
Cash paid during the period for interest $ 76 $ 94
Cash paid during the period for income taxes $ 190 $ 50
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
Littlefield, Adams & Company, March 31, 1995 Form 10-Q; Page 6
<PAGE> 7
LITTLEFIELD, ADAMS & COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(DOLLARS IN THOUSANDS)
NOTE 1. CONSOLIDATED FINANCIAL STATEMENTS
The accompanying consolidated financial statements include the accounts
of Littlefield, Adams & Company and its subsidiaries, Collegiate Pacific
Company, Medical Sales Associates, Inc., Cornerstone Laboratories, Inc.,
NUTECH, Inc., and Sports Imprints, Inc. ("the Company"). All significant
intercompany accounts and transactions have been eliminated in consolidation.
The consolidated balance sheet at March 31, 1995, and the consolidated
statements of operations and cash flows for the interim periods ended March 31,
1995 and 1994 have been prepared by the Company without audit. In the opinion
of management, all adjustments, consisting only of normal recurring
adjustments, necessary to present fairly the consolidated financial position,
results of operations and cash flows have been made. However, it should be
understood that accounting measurements at interim dates may be less precise
than at year end. The results of operations for the interim periods are not
necessarily indicative of the operating results for a full year or of future
operations.
Certain information normally included in financial statements prepared
in accordance with generally accepted accounting principles has been condensed
or omitted. The accompanying consolidated financial statements should be read
in conjunction with the consolidated financial statements and notes thereto
included in the Company's Annual Report on Form 10-K for the year ended
December 31, 1994.
Certain reclassifications of prior year amounts have been made to
conform to current year presentation.
NOTE 2. NATURE OF BUSINESS
The Company is principally engaged in the imprinting and
distribution of athletic and leisure wear products. The Company, in the course
of conducting its operations, sells to customers in various markets such as
major nationwide retailers, college bookstores, resort areas and theme parks
across the United States.
Littlefield, Adams & Company, March 31, 1995 Form 10-Q; Page 7
<PAGE> 8
LITTLEFIELD, ADAMS & COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(DOLLARS IN THOUSANDS)
NOTE 3. RESTATEMENT OF 1994 FIRST QUARTER RESULTS OF OPERATIONS
As previously reported in the Company's June 30, 1994 Form 10-Q, the
net loss originally reported for the three months ended March 31, 1994, was
overstated by approximately $82 due to an understatement of inventory at March
31, 1994.
The following tables sets forth selected information as originally
reported and as currently shown:
<TABLE>
<CAPTION>
For the three months ended March 31, As Originally As Currently
1994 Reported Adjustment Reported
---------------------------------------- ------------- ---------- ------------
<S> <C> <C> <C>
Net income.............................. (138) 82 (56)
Net income per share.................... (.06) .03 (.03)
Weighted average common shares
outstanding........................... 2,281,871 (75,000) 2,206,871
</TABLE>
NOTE 4. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is summarized as follows:
<TABLE>
<CAPTION>
March 31, December 31,
1995 1994
---- ----
<S> <C> <C>
Land $ 95 $ 95
Building and improvements 922 902
Machinery and equipment 2,477 2,343
------- -------
3,494 3,340
Less: Accumulated depreciation
and amortization (2,166) (2,086)
------- -------
$ 1,328 $ 1,254
======= =======
</TABLE>
NOTE 5. REVOLVING LINES OF CREDIT
On January 17, 1992, Collegiate Pacific Company entered into a line of
credit agreement with the Bank of Floyd, Virginia for a maximum principal
amount of $750 payable on demand, but not less than monthly payments of .25% of
the outstanding principal balance and accrued interest. Effective August 29,
1994, the Bank of Floyd reduced the maximum principal amount available to $500
payable on demand. In addition, the Bank of Floyd set the interest rate on the
line of credit at prime plus 1%. The Company is required to make monthly
payments of .25% of the outstanding principal balance and accrued interest
until the line is paid in full. Collateral consists of all of the plant and
equipment of Collegiate Pacific Company and is guaranteed by Littlefield, Adams
& Company. At March 31, 1995, $5 of the line of credit remains available to be
drawn down.
Littlefield, Adams & Company, March 31, 1995 Form 10-Q; Page 8
<PAGE> 9
LITTLEFIELD, ADAMS & COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(DOLLARS IN THOUSANDS)
On September 16, 1992, Collegiate Pacific Company signed an agreement
for a $3,000 revolving line of credit with Fremont Financial Corporation. The
line of credit is for accounts receivable and inventory financing and requires
accounts receivable to be less than 90 days outstanding to be eligible
collateral. The line is secured by virtually all the assets of Collegiate
Pacific Company and is guaranteed by Littlefield, Adams & Company. The line is
carried as a current liability in the accompanying consolidated financial
statements. In May 1994, the loan agreement was modified so that the total
line of credit was reduced to $750 with an inventory financing limit of $150.
Interest is charged on the outstanding balance at the rate of 3.75% per annum
over the "Reference Rate" (as defined in the line of credit agreement) of the
Bank of America San Francisco, California. Fremont Financial Corporation also
notified the Company in May 1994, of its intention to terminate the agreement
on the scheduled expiration date of September 16, 1994. The Company is
continuing to utilize this line of credit on a month-to-month extension while
arrangements for replacement financing are being finalized. At March 31, 1995,
$677 of the revolving line of credit remained to be drawn down. However, due to
collateral limitations, none of the excess was available for use.
Sports Imprints, Inc. has an accounts receivable financing agreement
with Merchant Factors Corp. which expires January 31, 1996, and which allows
Sports Imprints, Inc. to borrow up to 75% of qualified net accounts receivable.
The balance due at March 31, 1995, is approximately $1,793 and is due currently
as the receivables are collected. The agreement bears interest at prime plus
3.5%; however, Sports Imprints, Inc. does not pay any financing fees. Sports
Imprints, Inc.'s accounts receivable and inventory covered by purchase
guarantees and letters of credit issued by Merchant Factors Corp. are the
collateral for this loan. At March 31, 1995, outstanding purchase guarantees
and/or letters of credit issued by Merchant Factors Corp. amounted to
approximately $471. At March 31, 1995, additional borrowings available under
this agreement were approximately $476.
Outstanding balances are as follows:
<TABLE>
<CAPTION>
March 31, December 31,
1995 1994
---- ----
<S> <C> <C>
The Bank of Floyd $ 495 $ 499
Fremont Financial Corporation 73 373
Merchant Factors 1,793 264
------ ------
$2,361 $1,136
====== ======
</TABLE>
Littlefield, Adams & Company, March 31, 1995 Form 10-Q; Page 9
<PAGE> 10
LITTLEFIELD, ADAMS & COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(DOLLARS IN THOUSANDS)
NOTE 6. LONG-TERM DEBT
<TABLE>
<CAPTION>
March 31, December 31,
1995 1994
---- ----
<S> <C> <C>
Long-term debt balances are as follows:
Mortgage payable, principal callable after
January 1995, interest at 9.38%, due July 1, 2003,
payable monthly, collateralized by real property $269 $275
Note payable to a bank, principal callable on demand,
due September 1, 1999, interest at 8.75%, payable
monthly, collateralized by machinery and equipment 224 240
Other 30 22
---- ----
Total debt 523 537
Less - current portion 504 523
---- ----
$ 19 $ 14
==== ====
</TABLE>
Following are the maturities of long-term debt outstanding at March 31,
1995.
<TABLE>
<S> <C>
Current $504
1996 15
1997 3
1998 1
----
$523
====
</TABLE>
The schedule above reflects the classification of the mortgage payable
and the note payable to a bank as current maturities of long-term debt. The
Company believes the likelihood of the mortgage payable and the note payable
being called is remote and that the obligations will be satisfied by scheduled
payments through July 2003 and 1999, respectively. The carrying value of total
debt approximates fair market value at March 31, 1995 and December 31, 1994.
NOTE 7. CREDITORS' DEBT SETTLEMENT
In July 1991 Sports Imprints, Inc. entered into a plan of reorganization
with its creditors and a bank pursuant to Chapter 11 of the U.S. Bankruptcy
Code. The plan was confirmed in February 1992 and as a result, Sports
Imprints, Inc. negotiated a payment plan with its creditors that includes
extending payments through 1996. Of the total $408 to be repaid as of
March 31, 1995, $270 is included in accrued expenses and the remaining balance
is shown as creditors' debt settlement in the accompanying consolidated
financial statements.
Littlefield, Adams & Company, March 31, 1995 Form 10-Q; Page 10
<PAGE> 11
LITTLEFIELD, ADAMS & COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(DOLLARS IN THOUSANDS)
NOTE 8. COMMON STOCK
As of March 31, 1995, the Company had issued a total of 2,296,145
shares of its common stock. Treasury stock consisted of 18,878 shares, making a
total of 2,277,267 shares outstanding.
As of December 31, 1994, the Company had issued a total of 2,371,145
shares of its common stock. Treasury stock consisted of 18,878 shares and
75,000 shares were held in escrow, making a total of 2,277,267 shares
outstanding.
NOTE 9. RELATED PARTY TRANSACTIONS
For the three months ending March 31, 1995 and 1994, Sports
Imprints, Inc. paid approximately $11 and $0, respectively, in sales
commissions to JSA, Inc., a manufacturing sales and marketing company founded
by John K. Stuth, Chairman of the Board of Directors, Chief Executive Officer
and President of Littlefield, Adams & Company. JSA, Inc. performs marketing
services for Sports Imprints, Inc., as well as other manufacturing companies.
During the three months ending March 31, 1995, the Company incurred
approximately $49 in legal fees and reimbursed expenses to David M. Simmonds,
Esquire. Mr. Simmonds, who is a member of the Board of Directors, also serves
as general counsel for the Company.
NOTE 10. LEGAL MATTERS - (A more detailed description of these matters is set
forth in the Company's 1994 Form 10-K.)
SEC Investigation-
The Company has been the subject of a formal order of private
investigation pursuant to Section 20(a) of the Securities Act of 1933 and
Section 21(a) of the Securities Exchange Act of 1934. On April 5, 1995, the
Company announced that its Board of Directors had passed a resolution
authorizing the Company to enter into a consent decree with the Securities and
Exchange Commission (the "Commission"). The consent decree, to be entered
pursuant to an agreement in principle between the Company and the Commission's
Enforcement Division Staff, will settle all claims against the Company
resulting from the Commission's investigation, which began in late 1992.
Pursuant to the terms of the agreement in principle, the Company, which neither
admits nor denies liability, agrees to the entry of an injunction prohibiting
the Company from violating various provisions of the securities laws in the
future. The consent decree will not require the Company to pay any type of
monetary relief or penalty.
Littlefield, Adams & Company, March 31, 1995 Form 10-Q; Page 11
<PAGE> 12
LITTLEFIELD, ADAMS & COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(DOLLARS IN THOUSANDS)
The consent decree is subject to formal approval by the Commission.
If approved, the consent decree will be entered in conjunction with the
anticipated filing by the Commission of an enforcement proceeding against the
Company and others. Entry of the consent decree will fully settle all claims
against the Company. All such claims by the Commission relate to matters
alleged to have occurred while the Company was under the control of Curtis A.
Younts, Jr. Mr. Younts was removed from those positions and was relieved of
all operating authority on June 15, 1994. Since June 15, 1994, the Company has
fully cooperated with the Commission in the conduct of its investigation. The
Company intends to continue that cooperation during the pendency of the
Commission's action against others.
Securities Class Action-
The Company and certain of its current and past officers and
directors, and others, had been named as defendants in three actions brought by
individual plaintiffs, purportedly representing persons who purchased
securities of the Company during a total period running from July 1, 1991
through May 17, 1994. These actions were consolidated for discovery and
pretrial purposes in the United States District Court for the Western District
of Texas and are captioned In re Littlefield, Adams & Co. Securities
Litigation, Civil Action No. SA 93 CA 0561 ("Consolidated Action"). On
February 21, 1995, the Company reached an agreement with the plaintiffs to
settle these claims, as well as certain related claims involving other parties.
Under the terms of this agreement, which is subject to court approval, the
Company will issue $1,400 in stock and pay $210 in cash to the members of the
class to settle the claims brought by the securities plaintiffs. However, the
Company will receive $360 from the settlement of a related matter. In return,
the Company will receive releases from the plaintiffs and the other defendants.
Management of the Company believes that the settlement is in the best interests
of all shareholders; however, there is no assurance that the Court will approve
the final settlement.
Littlefield, Adams & Company v. Younts, et al.-
This action was filed in the Texas District Court in the 57th Judicial
District, Bexar County, Texas, by the Company against its former Chairman,
Curtis A. Younts, Jr., his wife, and various of their affiliated entities
seeking the immediate repayment of amounts alleged to have been misappropriated
by the defendants. Younts filed a counterclaim against the Company seeking
compensation for an unstated amount for services and expense funds he claims to
have provided the Company. Pending court approval of the class action
litigation settlement described above, all of the parties have agreed to
dismiss their claims and provide mutual releases of liability.
Curtis A. Younts, Jr. v. Littlefield, Adams & Company, et al.-
This action was filed in the Texas District Court in the 169th
Judicial District, Bell County, Texas, against the Company and one of its
officers by its former Chairman, Curtis A. Younts, Jr. Mr. Younts seeks an
unspecified amount for the reasonable value of his services, allegedly rendered
on behalf of the Company since 1991. Pending court approval of the class
action litigation settlement described above, all of the parties have agreed to
dismiss their claims and provide mutual releases of liability.
Littlefield, Adams & Company, March 31, 1995 Form 10-Q; Page 12
<PAGE> 13
LITTLEFIELD, ADAMS & COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(DOLLARS IN THOUSANDS)
Charlotte E. Picard, Derivatively on Behalf of Littlefield, Adams & Company,
v. Curtis A. Younts, Jr., et al.-
This action was filed in the United States District Court, Western
District of Texas on June 29, 1994. The Company was named as a nominal
defendant. The complaint alleged that certain current and former officers and
directors of the Company, some of the Company's former lawyers and the
Company's former auditors "damaged LFA by causing or permitting LFA to commit
securities fraud and by damaging or destroying the Company's reputation." The
parties to this action, with the exception of certain of the Company's former
lawyers, have agreed to settle this action. The settlement agreement is
subject to court approval.
Littlefield, Adams & Company v. Jeffers, Brook, Kreager & Gragg, et al.-
The Company filed suit on May 9, 1995, in the United States District
Court for the Western District of Texas against its former attorneys, the law
firm of Jeffers, Brook, Kreager & Gragg. The lawsuit also names two members of
the Jeffers, Brook firm as individual defendants.
In the suit, LFA alleges various causes of action against the
defendants, including negligence, breach of fiduciary duty, violation of the
Texas Deceptive Trade Practices Act ("DTPA"), violation of the RICO statute,
conspiracy, money had and received, breach of contract, unjust enrichment and
fraud. The suit seeks actual damages "in an amount expected to exceed
$1,000,000", an additional award of three times actual damages under the DTPA,
treble damages under RICO, punitive damages and attorneys' fees.
NOTE 11. CONCENTRATION OF SALES AND CREDIT RISK
Significant Customers-
The Company manufactures and sells imprinted apparel to companies in
the retail industry. Sales to one retail customer which individually exceeded
ten percent of consolidated revenue totaled 72% for the three months ended
March 31, 1995 and 36% for the three months ended March 31, 1994. The
Company's customers are reputable national retail discount chains. The Company
mitigates credit risk by performing ongoing credit evaluations on its
customers. Historically, bad debt expense has been within management's
expectations.
Trade receivable balances relating to this customer were approximately
$2,490 at March 31, 1995 and $1,255 at December 31, 1994.
Littlefield, Adams & Company, March 31, 1995 Form 10-Q; Page 13
<PAGE> 14
LITTLEFIELD, ADAMS & COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(DOLLARS IN THOUSANDS)
Significant Licensors-
The Company has obtained licenses from most of the major colleges and
universities in the United States. The Company also holds several licenses for
such highly recognizable entities as Harley-Davidson, Warner Brothers "Looney
Tunes" characters and "NASCAR." These licenses are typically non-exclusive and
generally have a term of one year. The Company has historically been able to
renew the contracts from its significant licensors. Although there is no
assurance that such licenses can or will be extended beyond the expiration
dates shown below, if the Company were unable to renew its more significant
license agreements it is unlikely that sales levels would not be adversely
affected. Management is currently taking steps to diversify and reduce this
risk in the future. The following is a list of significant licenses held by
the Company as of March 31, 1995, and their respective expiration dates:
<TABLE>
<CAPTION>
LICENSOR EXPIRATION
-------- ----------
<S> <C>
Harley-Davidson December 1995
Warner Brothers "Looney Tunes"/Collegiate Licensing Company December 1995
Warner Brothers "Looney Tunes"/NASCAR December 1995
NASCAR December 1995
The University of Notre Dame December 1995
</TABLE>
Harley-Davidson licensed sales accounted for 90% and 80% of total
sales for the three months ended March 31, 1995 and 1994, respectively. Warner
Brothers licensed sales were 0% and 19% of total sales for the three months
ended March 31, 1995 and 1994, respectively.
Littlefield, Adams & Company, March 31, 1995 Form 10-Q; Page 14
<PAGE> 15
LITTLEFIELD, ADAMS & COMPANY AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
(UNAUDITED)
LIQUIDITY AND CAPITAL SOURCES
Net cash utilized in operating activities during the first quarter of
1995 and 1994 amounted to $1,098,000 and $54,000, respectively. The large
increase in cash used in operations was primarily the result of increases in
accounts receivable and inventory, and the net decrease in accounts payable and
accrued expenses. Investing activities in 1995 primarily related to the
acquisition of $154,000 of property, plant, and equipment, including $9,000
through capital lease arrangements. Financing activities centered around the
Company's revolving lines of credit whose combined balances rose by $1,225,000
during 1995 (Note 5).
Management is working to secure a comprehensive corporate line of
credit to support all current and future borrowings. If negotiations for such
a comprehensive line of credit were unsuccessful, the Company would be able to
continue its current operations with the existing revolving lines. Management
considers it probable that it will succeed in obtaining a corporate financing
package.
Management currently expects cash flows from operations and financing
activities in 1995 to be sufficient to meet its anticipated operating needs.
The table below is a summary of the consolidated statement of cash
flows for the three months ended March 31, 1995 and 1994.
<TABLE>
<CAPTION>
For the three months ended
March 31,
-----------------------------
1995 1994
----------- -----------
<S> <C> <C>
Net cash used in operating activities $(1,098,000) $ (54,000)
Net cash used in investing activities (150,000) (31,000)
Net cash provided by financing activities 1,132,000 161,000
----------- -----------
Net increase (decrease) in cash (116,000) 76,000
Cash at beginning of year 221,000 --
----------- -----------
Cash at end of year $ 105,000 $ 76,000
=========== ===========
</TABLE>
Profits, primarily from the Sports Imprints, Inc. subsidiary,
borrowings from the Company's lines of credit, and lease income are expected to
provide adequate capital resources for operations in 1995. For the quarter
ended March 31, 1995, operating activities utilized cash of $1,098,000, while
$150,000 was used in investing activities. The Company borrowed a total of
$6,025,000 during the first quarter of 1995, and repaid $4,893,000, realizing
an increase of $1,132,000 in financing activities. During the three months
ended March 31, 1995, there was a net decrease in cash of $116,000.
Littlefield, Adams & Company, March 31, 1995 Form 10-Q; Page 15
<PAGE> 16
LITTLEFIELD, ADAMS & COMPANY AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
(UNAUDITED)
The Company reached an agreement with the plaintiffs to settle the
Securities Class Action litigation on February 21, 1995. Subject to the
agreement being approved by the court, the Company will issue $1,400,000 of its
common stock and pay $210,000 in cash to the members of the class (Note 1). As
part of the settlement of the derivative action, the Company will receive 1,000
shares of its stock from a former President. The current President will
relinquish back to the Company rights that he has to 5,000 shares of stock and
rights that he has to an option to acquire 50,000 shares of stock. A current
director will relinquish back to the Company rights that he has to 5,000 shares
of stock. Management does not expect this settlement to have a material
adverse effect on the condition of the company. The settlement costs along
with related professional fees have been recorded in 1993 as part of the
restatement of that year. See Note 2 and Note 5 of the Company's 1994 Annual
Report, Form 10-K.
RESULTS OF OPERATIONS
Net sales were essentially flat during the first quarters of 1995 and
1994, but gross profit margin increased from 29% to 38%. Contract production
costs decreased by approximately $380,000 through increasing internal
production capacity and not requiring contract embroidery services in the first
quarter of 1995.
Retail customers remained cautious in the first quarter of 1995, as an
unseasonably mild winter turned into a cooler than usual spring. The Company
is expecting the volume of retail sales to fully recover by the end of the 1995
second quarter.
At March 31, 1995, bookings for shipments in the second quarter were
approximately $4,600,000 as compared to $5,500,000 a year ago.
Selling and administrative expenses were up slightly to 32% of net
sales from 29% for the quarters ended March 31, 1995 and 1994, respectively.
Royalties from the sales of licensed products increased approximately $105,000
as the average royalty rate increased from 9% to 11% of net sales.
Professional fees were up slightly in 1995.
In shifting its marketing focus, the Company's subsidiary, Collegiate
Pacific Company, will continue supplying the college bookstore market, but will
place increased emphasis on expanding into the major retail stores. Collegiate
Pacific Company is working to increase sales relating to the existing NASCAR
and NASCAR/Warner Brothers licenses by creating new graphics and expanding
distribution channels. Additionally, the Company's new "Laguna" and "Attitude"
based licenses are being developed along with a new line based on the most
popular race tracks on the NASCAR circuit. In addition to the anticipated
sales growth, improvement in production cost is expected as average order size
increases allowing for more efficient, longer production runs.
The Company plans to continue its market expansion into the women's
and youth's markets during 1995. The Company is entering the sporting goods
"active wear" market and plans on developing a wildlife/outdoor series of
products. Also envisioned is entry into military sales through the AAFES and
the strategic development of "LFA" branded merchandise using the new corporate
logo.
Littlefield, Adams & Company, March 31, 1995 Form 10-Q; Page 16
<PAGE> 17
LITTLEFIELD, ADAMS & COMPANY AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
(UNAUDITED)
A new national sales manager was hired in 1994 to direct a new
nationwide sales campaign. The Company expects to cover the entire United
States through the addition of regional sales persons and developing market
specific independent manufacturers representatives.
Approximately 95% of the Company's revenue are from sales of licensed
products relating to Harley-Davidson, Warner Brothers, NASCAR, and Notre Dame
for the three months ended March 31, 1995 (Note 11). These licenses expire
December, 1995. The Company believes that relations with these licensors are
good and that the licenses will be renewed; however, there are no guarantees
that such licenses will be extended or renewed beyond their current expiration
date. The Company is continually searching for, and being solicited by, new
licensors. Management believes that if any of its significant licenses were
not renewed, there could be an adverse effect on sales in the year ended
December 31, 1996. Management is currently taking steps to diversify and
reduce this risk in the future.
Accounts receivable increased due to significant shipments near the
end of the quarter (Note 11). The sales are on standard terms and are expected
to be collected during the second quarter.
Spring orders normally shipped in the first quarter were delayed by
approximately 60 days as buyers rescheduled shipments because of cooler than
normal temperatures in the last half of the quarter. The raw materials for
these orders were received during the quarter and is reflected in the 13%
increase in inventory for the period.
The net reduction in accounts payable and accrued expenses relates
mostly to the payment for inventory purchases made late in 1994.
Borrowings for inventory purchases were mostly responsible for the net
increase in the revolving lines of credit balance.
Littlefield, Adams & Company, March 31, 1995 Form 10-Q; Page 17
<PAGE> 18
LITTLEFIELD, ADAMS & COMPANY
PART II - OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS:
The Company is involved in various legal proceedings.
Information required by this Item is included in Note 10 to
the interim Consolidated Financial Statements, which
information is incorporated herein by reference.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS:
(a) The 1995 annual meeting of shareholders was held on May
9, 1995, with a quorum of more than 50% of the
outstanding shares represented by proxy or in person.
(b) The following director was elected at the 1995 annual
meeting - William E. Goettelman.
(c) See Exhibit (99) for required information.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K:
(a) Exhibits required by Item 601 of Regulation S-K
(99) CERTIFICATE AND REPORT OF INSPECTOR OF
ELECTION dated May 9, 1995.
Littlefield, Adams & Company, March 31, 1995 Form 10-Q; Page 18
<PAGE> 19
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 thereunto duly authorized.
LITTLEFIELD, ADAMS & COMPANY
----------------------------
(Registrant)
Date: May 11, 1995 /S/ JOHN K. STUTH /S/
------------------------------------------------
John K. Stuth
Chairman, President and Chief Executive Officer
(Principal Executive Officer)
Date: May 11, 1995 /S/ WARREN L. RAWLS /S/
------------------------------------------------
Warren L. Rawls
Chief Financial Officer, Treasurer and Secretary
(Principal Financial & Accounting Officer)
Littlefield, Adams & Company, March 31, 1995 Form 10-Q; Page 19
<PAGE> 1
EXHIBIT 99
LITTLEFIELD, ADAMS & COMPANY
CERTIFICATE AND REPORT OF INSPECTOR OF ELECTION
The undersigned, duly appointed Inspector of Election to act at the 1995
Annual Meeting of Shareholders of Littlefield, Adams & Company (the "Company"),
held this 9th day of May, 1995, having before entering upon the discharge of my
duties, taken and subscribed an oath faithfully to execute the duties of
Inspector at such meeting with strict impartiality and according to my best
ability, DOES HEREBY CERTIFY:
That according to the certified list of shareholders presented at the
Meeting there were 2,277,267 shares of Common Stock of the Company issued and
outstanding and entitled to vote at such meeting, and that there were present
in person or represented by proxy the holders of 1,872,248 shares of said
Common Stock;
That I did receive votes of the shareholders of said Company by ballot, in
person and by proxy, with respect to the election of one director of said
Company; and
That at such election of a director, votes were cast as follows:
<TABLE>
<CAPTION>
NUMBER OF VOTES NUMBER OF VOTES
NAME FOR WITHHELD
---- --- --------
<S> <C> <C>
William E. Goettelman 1,867,225 5,023
--------- -----
</TABLE>
I therefore declare that the nominee for election as a director was
duly elected.
IN WITNESS WHEREOF, I have hereunto set my hand this 9th day of May,
1995, at Sturgeon Bay, Wisconsin.
/S/ NANCY DAUFFENBACH /S/
-------------------------
Nancy Dauffenbach
STATE OF WISCONSIN )
: ss.:
COUNTY OF DOOR )
On this 9th day of May, 1995, before me personally came Nancy
Dauffenbach, to me known and known to me to be the individual described in and
who executed the foregoing certificate, and she duly acknowledged to me that
she executed same.
(Notary stamp /S/ TRACY SCHULTZ /S/
appears here) ---------------------
Notary Public - Tracy Schultz
My Commission expires April 18, 1999.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> MAR-31-1995
<CASH> 105
<SECURITIES> 0
<RECEIVABLES> 3,759
<ALLOWANCES> 315
<INVENTORY> 4,097
<CURRENT-ASSETS> 8,281
<PP&E> 3,494
<DEPRECIATION> 2,166
<TOTAL-ASSETS> 10,261
<CURRENT-LIABILITIES> 7,237
<BONDS> 19
<COMMON> 2,296
0
0
<OTHER-SE> (876)
<TOTAL-LIABILITY-AND-EQUITY> 10,261
<SALES> 5,472
<TOTAL-REVENUES> 5,580
<CGS> 3,382
<TOTAL-COSTS> 3,382
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0<F1>
<INTEREST-EXPENSE> 69
<INCOME-PRETAX> 369
<INCOME-TAX> 121
<INCOME-CONTINUING> 248
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 248
<EPS-PRIMARY> 0.11
<EPS-DILUTED> 0.11
<FN>
<F1>
* Bad debt expense of 8 is included in the 1,760 reported as selling and
administrative expenses
</FN>
</TABLE>
