<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 June 30, 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 June 30, 1995
----- ----------------------------
Common Stock, par value 2,256,603 shares
$1.00 per share
<PAGE> 2
LITTLEFIELD, ADAMS & COMPANY
INDEX Page No.
Part I. Financial Information
Item 1. Financial Statements
Report of Independent Accountants 3
Consolidated Balance Sheets-
June 30, 1995 and December 31, 1994 4
Consolidated Statements of Operations -
for the three months and six months ended
June 30, 1995 and 1994 5
Consolidated Statements of Cash Flow -
for the six months ended
June 30, 1995 and 1994 6
Notes to Consolidated Financial Statements 7
Item 2. Management Discussion and Analysis of
Financial Condition and Results of Operations 14
Part II. Other Information
Item 1. Legal Proceedings 17
Signatures 18
Littlefield, Adams & Company, June 30, 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
June 30, 1995, and the related consolidated statements of operations for the
three-month and the six-month periods ended June 30, 1995, and the statement
of cash flows for the six-month period ended June 30, 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
July 28, 1995
Littlefield, Adams & Company, June 30, 1995 Form 10-Q; Page 3
<PAGE> 4
LITTLEFIELD, ADAMS & COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS
(Unaudited)
June 30, December 31,
1995 1994
---------------------------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Current assets:
Cash $ 37 $ 221
Accounts receivable:
Trade, less allowance of $246 at 6/30/95
and $329 at 12/31/94 1,393 2,792
Affiliates 150 150
Other 250 238
Inventories 4,003 3,624
Prepaid expenses and other current assets 292 275
-------- --------
Total current assets 6,125 7,300
Property, plant and equipment, net 1,315 1,254
Goodwill - net 562 599
Notes receivable and other assets 57 79
-------- --------
TOTAL ASSETS $ 8,059 $ 9,232
======== ========
LIABILITIES AND SHAREHOLDERS' INVESTMENT
Current liabilities:
Accounts payable $ 2,103 $ 2,147
Accrued expenses 1,928 2,579
Notes payable 84 10
Revolving lines of credit 991 1,136
Current portion of long-term debt 495 523
-------- --------
Total current liabilities 5,601 6,395
Creditors' debt settlement 70 205
Long-term debt, less current portion 15 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 2,256,603 for 1995 and 2,277,267 for 2,296 2,371
1994.
Capital in excess of par value 5,549 5,474
Accumulated deficit (6,673) (6,583)
-------- --------
1,172 1,262
Treasury stock, at cost - shares of 39,542
for 1995 and 18,878 for 1994. (246) (90)
-------- --------
926 1,172
-------- --------
TOTAL LIABILITIES AND SHAREHOLDERS' INVESTMENT $ 8,059 $ 9,232
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
Littlefield, Adams & Company, June 30, 1995 Form 10-Q; Page 4
<PAGE> 5
LITTLEFIELD, ADAMS & COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
For the 3 months ended June 30, For the 6 months ended June 30,
------------------------------- -------------------------------
1995 1994 1995 1994
----- ------ ------ ------
(DOLLARS IN THOUSANDS, (DOLLARS IN THOUSANDS,
Except per share amounts) Except per share amounts)
<S> <C> <C> <C> <C>
Revenues:
Net product sales $ 3,802 $ 7,021 $ 9,274 $ 12,556
Other revenues 51 56 159 117
---------- ---------- ---------- ----------
Total revenues 3,853 7,077 9,433 12,673
Costs & expenses:
Cost of products sold 2,801 4,747 6,183 8,692
Selling & administrative 1,459 1,725 3,219 3,315
---------- ---------- ---------- ----------
Total costs and expenses 4,260 6,472 9,402 12,007
---------- ---------- ---------- ----------
Income from operations (407) 605 31 666
Other expense:
Interest (84) (111) (153) (207)
---------- ---------- ---------- ----------
Income (loss) before provision for income taxes (491) 494 (122) 459
Provision for income taxes (153) 84 (32) 105
---------- ---------- ---------- ----------
Net income (loss) $ (338) $ 410 $ (90) $ 354
========== ========== ========== ==========
Weighted average common shares outstanding 2,272,423 2,326,871 2,272,423 2,326,871
========== ========== ========== ==========
Net income (loss) per share $ (0.15) $ 0.18 $ (0.04) $ 0.15
========== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
Littlefield, Adams & Company, June 30, 1995 Form 10-Q; Page 5
<PAGE> 6
LITTLEFIELD, ADAMS & COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
For the 6 months ended June 30,
-------------------------------
1995 1994
-------------------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (90) $ 354
Adjustments to reconcile net income (loss) to
net cash used in operating activities:
Depreciation and amortization 245 152
(Gain) loss on sale of property and equipment (1)
Changes in operating assets and liabilities:
Accounts and notes receivable, net 1,299 (235)
Inventories, net (379) (303)
Prepaid expenses and other current assets (48) (50)
Accounts payable (44) 530
Accrued expenses and other (650) (64)
--------- ----------
Net cash provided by operating activities 333 383
Cash flows from investing activities:
Proceeds from sale of property and equipment -- 1
Purchase of property, plant, and equipment (203) (201)
(Increase) decrease in notes receivable and other assets (4) 85
--------- ----------
Net cash used in investing activities (207) (115)
Cash flows from financing activities:
Decrease in bank overdraft -- (24)
Proceeds from line of credit and short term borrowings 10,526 10,746
Repayments of line of credit and short term borrowings (10,671) (10,686)
Payment on creditors' settlement debt (135) (134)
Proceeds from bank and other notes payable 93 --
Repayment of bank and other notes payable (55) (120)
Cost to purchase treasury stock (68) --
--------- ----------
Net cash used in financing activities (310) (218)
--------- ----------
Net increase (decrease) in cash (184) 50
Cash at beginning of period 221 --
--------- ----------
Cash at end of period $ 37 $ 50
========= ==========
Supplemental disclosures of cash flows Information:
Cash paid during the period for interest $ 160 $ 205
Cash paid during the period for income taxes $ 320 $ --
</TABLE>
In May 1995, the Company received 7,974 shares of its own stock which satisfied
a receivable of $88.
The accompanying notes are an integral part of these consolidated financial
statements.
Littlefield, Adams & Company, June 30, 1995 Form 10-Q; Page 6
<PAGE> 7
LITTLEFIELD, ADAMS & COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(DOLLARS IN THOUSANDS)
NOTE 1. CONSOLIDATED FINANCIAL STATEMENTS
The accompanying consolidated financial statements include the
accounts of Littlefield, Adams & Company and its subsidiaries, Medical Sales
Associates, Inc., Cornerstone Laboratories, Inc., and NUTECH, Inc. ("the
Company"). The former wholly owned subsidiaries, Collegiate Pacific Company
and Sports Imprints, Inc. were merged into Littlefield, Adams & Company
effective June 30, 1995. All significant intercompany accounts and
transactions have been eliminated in consolidation.
The consolidated balance sheet at June 30, 1995, and the consolidated
statements of operations and cash flows for the interim periods ended June 30,
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.
NOTE 3. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is summarized as follows:
<TABLE>
<CAPTION>
June 30, December 31,
1995 1994
---- ----
<S> <C> <C>
Land $ 95 $ 95
Building and improvements 927 902
Machinery and equipment 2,530 2,343
------- -------
3,552 3,340
Less: Accumulated depreciation
and amortization (2,237) (2,086)
------- -------
$ 1,315 $ 1,254
======= =======
</TABLE>
Littlefield, Adams & Company, June 30, 1995 Form 10-Q; Page 7
<PAGE> 8
LITTLEFIELD, ADAMS & COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(DOLLARS IN THOUSANDS)
NOTE 4. 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 June 30, 1995, $9 of the line of credit remains available to be
drawn down.
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 was for accounts receivable and inventory financing and required
accounts receivable to be less than 90 days outstanding to be eligible
collateral. The line was secured by virtually all the assets of Collegiate
Pacific Company and was 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 continued
to utilize this line of credit on a month-to-month extension while arrangements
for replacement financing were being finalized. As of June 15, 1995, the total
line of credit was amended so that maximum borrowings could not exceed $100.
At June 30, 1995, additional borrowings available under this amended agreement
were approximately $37. As of August 1, 1995, the Company terminated its
agreement with Fremont and the balance was paid off.
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 June 30, 1995, is approximately $437 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.
Effective July 1, 1995, the agreement will bear interest at prime plus 5.0%.
Beginning June 1, 1995, Sports Imprints, Inc.'s accounts receivable, inventory
and machinery and equipment are the collateral for this loan. At June 30,
1995, additional borrowings available under this agreement were approximately
$283. In connection with the merger of Sports Imprints, Inc. and Collegiate
Pacific Company into Littlefield, Adams & Company, the Company is in the
process of transferring the Merchant Factors Corp. agreement to Littlefield,
Adams & Company.
Littlefield, Adams & Company, June 30, 1995 Form 10-Q; Page 8
<PAGE> 9
LITTLEFIELD, ADAMS & COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
Outstanding balances are as follows: June 30, December 31,
1995 1994
-------- -----------
<S> <C> <C>
The Bank of Floyd $ 491 $ 499
Fremont Financial Corporation 63 373
Merchant Factors 437 264
----- ------
$ 991 $1,136
===== ======
</TABLE>
NOTE 5. LONG-TERM DEBT
<TABLE>
<CAPTION>
June 30, 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 $264 $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 219 240
Other 27 22
---- ----
Total debt 510 537
Less - current portion 495 523
---- ----
$ 15 $ 14
==== ====
</TABLE>
Following are the maturities of long-term debt outstanding at
June 30, 1995.
<TABLE>
<CAPTION>
<S> <C>
Current $495
1996 9
1997 5
1998 1
$510
====
</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 June 30, 1995 and December 31,
1994.
Littlefield, Adams & Company, June 30, 1995 Form 10-Q; Page 9
<PAGE> 10
LITTLEFIELD, ADAMS & COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(DOLLARS IN THOUSANDS)
NOTE 6. 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 $340 to be repaid as of
June 30, 1995, $270 is included in accrued expenses and the remaining balance
is shown as creditors' debt settlement in the accompanying consolidated
financial statements.
NOTE 7. COMMON STOCK
As of June 30, 1995, the Company had issued a total of 2,296,145
shares of its common stock. Treasury stock consisted of 39,542 shares, making a
total of 2,256,603 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 8. RELATED PARTY TRANSACTIONS
For the six months ending June 30, 1995 and 1994, the Company paid
approximately $33 and $7, respectively, in sales commissions to JSA, Inc., a
sales and marketing company founded by John K. Stuth, formerly the Chairman of
the Board of Directors, Chief Executive Officer and President of Littlefield,
Adams & Company. The relationship between the Company and JSA, Inc. has been
terminated.
During the six months ending June 30, 1995, the Company paid
approximately $95 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. Mr. Simmonds was elected President of the
Company by the Board of Directors on May 30, 1995, and Chief Executive Officer
of the Company and interim Chairman of the Board on July 12, 1995. As a
result, Mr. Simmonds is now compensated as an employee.
NOTE 9. LEGAL MATTERS - (A more detailed description of these matters is set
forth in the Company's 1994 Form 10-K.)
SEC Investigation-
An enforcement action entitled Securities and Exchange Commission v.
Younts, et. al., was filed in the United States District Court for the District
of Columbia in June, 1995. The Company and two of its former officers are
named as defendants. As a result of a settlement agreement reached prior to
the filing of the suit, which was approved by the Securities and Exchange
Commission, the Company, without admitting or denying the substantive
allegations of the complaint, agreed to the entry of a consent decree and
judgment which enjoins the Company from violating certain federal securities
laws and regulations in the future. As a result of this settlement and the
judgment entered by the Court, which requires no monetary payment by the
Company, the claims against the Company are fully settled.
Littlefield, Adams & Company, June 30, 1995 Form 10-Q; Page 10
<PAGE> 11
LITTLEFIELD, ADAMS & COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(DOLLARS IN THOUSANDS)
Securities Class Action-
The Company and certain of its current and past officers and
directors, and others, have been named as defendants in three actions brought
by individual plaintiffs, purportedly representing persons who purchased
securities of the Company during the period from July 1, 1991 through May 17,
1994. These actions have been 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"). The plaintiffs allege that the
Company and certain of its current and past officers and directors, and others,
violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and
Rule 10(b)-5 promulgated thereunder, as a result of alleged misrepresentations
and omissions in connection with the annual report for 1992, the 1993 quarterly
reports, and certain press releases. The complaint also alleges a claim for
treble-damages under the Racketeer Influenced and Corrupt Organization Act, 18
U.S.C. Sec. 1964. The amount of damages sought is not specified. 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. In return, the Company
will receive releases from the plaintiffs and the other defendants. A motion
for preliminary approval of the settlement has been filed, but no hearing date
has been set for the Court for final approval of the settlement. If the
settlement is approved, the Company will receive $360 from the settlement of a
related matter.
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 $912 and other 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. The Company denies that it owes
any amount to Younts. The parties have agreed to dismiss this case once the
settlement in the Class Action becomes final.
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. Younts seeks an unspecified amount for
the reasonable value of his services, allegedly rendered on behalf of the
Company since 1991. The Company denies that it owes any amount to Younts. The
parties have agreed to dismiss this case once the settlement in the Class Action
becomes final.
Littlefield, Adams & Company, June 30, 1995 Form 10-Q; Page 11
<PAGE> 12
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 is named as a nominal
defendant. The complaint alleges 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. Under the terms of this agreement,
which is subject to court approval, the Company's former auditors will pay $130
to the Company and the Company will issue $50 in stock to those former auditors
in settlement of claims for fees. In addition, (1) John K. Stuth, the Company's
former Chairman of the Board, President and CEO will relinquish back to the
Company rights that he has to 5,000 shares of LFA stock and rights that he has
to an option to acquire 50,000 shares of LFA stock; (2) Director Stanley
Halbreich will relinquish back to the Company rights that he has to 5,000
shares of LFA stock; and (3) former President Wade Hudman will return 1,000
shares of LFA stock to the Company. The counsel for the plaintiffs in this
action has stated that he will ask the Court to award the entire $130 cash
payment to him as attorneys fees. The Company will oppose that request.
Littlefield, Adams & Company v. Jeffers, Brook, Kreager & Gragg, et al.-
This action was filed in the United States District Court for the
Western District of Texas in May 1995, by the Company against its former
attorneys. The complaint alleges, among other things, that the defendants
breached fiduciary duties owed to the Company; knowingly received Company funds
for personal legal services they provided to the Company's former Chairman,
Curtis Younts, Jr., his family and his other companies; that the defendants
represented both the Company and other parties in litigation, at the Company's
expense, despite knowledge that a conflict of interest existed between the
Company and those other parties; and that the defendants failed to disclose to
the Company's Board of Directors that Younts was using Company funds for
personal purposes and that Younts was engaged in other improper and
unauthorized activity. The Company seeks damages, including damages and
attorneys fees under the Texas Deceptive Trade Practices Act, punitive damages
and other relief. The defendants deny these claims. No trial date has been
set.
NOTE 10. 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 63% for the six months ended June
30, 1995 and 34% for the six months ended June 30, 1994. The Company's
customers are reputable national and regional retail 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
$300 at June 30, 1995 and $1,255 at December 31, 1994.
Littlefield, Adams & Company, June 30, 1995 Form 10-Q; Page 12
<PAGE> 13
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 June 30, 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
National Pastimes December 1996
Laguna December 1997
</TABLE>
Harley-Davidson licensed sales accounted for 86% and 74% of total
sales for the six months ended June 30, 1995 and 1994, respectively.
Littlefield, Adams & Company, June 30, 1995 Form 10-Q; Page 13
<PAGE> 14
LITTLEFIELD, ADAMS & COMPANY AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL SOURCES
Net cash flows from operating activities during the first and second
quarters of 1995 and 1994 amounted to $333,000 and $383,000, respectively.
Investing activities in 1995 primarily related to the acquisition of $212,000
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 decreased by $145,000 during the first
six months of 1995 (Note 4).
The Company has pledged its inventory in order to secure additional
borrowings. Management expects to continue borrowing against the inventory
until sometime in the fourth quarter, when borrowings on accounts receivable
are expected to be sufficient to support the Company's working capital needs
(Note 4).
As of August 1, 1995, the Company terminated its agreement with
Fremont Financial Corporation. The Company expects to secure an accounts
receivable financing agreement with Merchant Factors Corp. for its Collegiate
Pacific division (Note 4).
The table below is a summary of the consolidated statement of cash
flows for the six months ended June 30, 1995 and 1994.
<TABLE>
<CAPTION>
For the six months ended
June 30,
--------------------------------
1995 1994
---------- ---------
<S> <C> <C>
Net cash provided by operating activities $ 333,000 $ 383,000
Net cash used in investing activities (207,000) (115,000)
Net cash used in financing activities (310,000) (218,000)
---------- ---------
Net increase (decrease) in cash (184,000) 50,000
Cash at beginning of year 221,000 --
---------- ---------
Cash at end of year $ 37,000 $ 50,000
========== =========
</TABLE>
Profits, primarily from the Sports Imprints division, borrowings from
the Company's lines of credit, and lease income are expected to provide
adequate capital resources for operations in 1995. For the first six months of
1995, the Company borrowed a total of $10,619,000 and repaid $10,861,000.
Additionally, the Company utilized $68,000 to purchase treasury stock. This
resulted in a net decrease of $310,000 from financing activities. During the
six months ended June 30, 1995, there was a net decrease in cash of $184,000.
Littlefield, Adams & Company, June 30, 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
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 9). As
part of the settlement of the derivative action, the Company will receive 1,000
shares of its stock from a former President, and two individuals who were
officers and directors on the date of the settlement will relinquish back to
the Company rights that they have for a total of 10,000 shares of stock. In
addition, one of the individuals will relinquish back to the Company rights
that he has under an option agreement to acquire 50,000 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 for the second quarter of 1995 were $3,802,000, compared to
$7,021,000 for the second quarter of 1994. Net sales for the first two
quarters of 1995 were $9,274,000, compared to $12,556,000 for the first two
quarters of 1994.
The decrease in sales for the second quarter was primarily as a result
of a general slow-down in apparel sales at the retail level. A significant
amount of goods which the Company had anticipated shipping during the quarter
was deferred to subsequent periods. As a result, the inventories at June 30,
1995 were $4,003,000, compared to the inventories at December 31, 1994 of
$3,624,000; an increase of approximately 10%.
Gross profit margins for the second quarter were 26% compared to 38%
in the first quarter and 32% in the 1994 second quarter. The reason for the
lower margins was that some sales were made at lower than normal list prices.
Year to date in 1995 and 1994, gross profit margins were 33% and 31%,
respectively.
Bookings for shipments in the third quarter are approximately
$4,600,000 as compared to $5,700,000 a year ago.
Cash flow was adversely impacted during the second quarter because of
a decrease in sales and increased inventories. Management expects this to
improve in the latter part of the third quarter.
As part of a restructuring plan, effective June 30, 1995, Sports
Imprints, Inc. and Collegiate Pacific Company converted from wholly-owned
subsidiary corporations and merged into Littlefield, Adams & Company. This
change will significantly reduce the base on which certain income tax
obligations are calculated, and, correspondingly, reduce the Company's income
tax liabilities.
Littlefield, Adams & Company, June 30, 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
In addition, the Company intends to close its Collegiate Pacific
facility in Roanoke, Virginia, and consolidate the Collegiate Pacific
operations with the Sports Imprints operations in Huber Heights, Ohio. The
Company expects this consolidation to result in a significant reduction in
general overhead expenses. The Company is also evaluating interest shown by
certain third-parties that could involve the sale of all or a portion of
Collegiate Pacific's operations. The Company, based on book values, appraised
values and preliminary offers from prospective buyers, does not believe that it
will incur a loss on the disposition of Collegiate Pacific's assets, and as of
June 30, 1995, the Company has not accrued for any loss.
Selling and administrative expenses for the second quarter were
$1,459,000 compared to $1,725,000 for the second quarter of 1994, a decrease of
15%. Year to date selling and administrative expenses were $3,219,000 and
$3,315,000 for 1995 and 1994, respectively.
Royalties for the second quarter of 1995 were $415,000 compared to
$685,000 for the second quarter of 1994. As a percentage of sales, the
royalties for the second quarter were 10.9% compared to 9.8% last year.
Royalties for the first half of 1995 were $1,031,000 compared to $1,197,000 for
1994. In 1995, royalties were 11.1% of sales versus 9.5% of sales for 1994.
Professional fees in the 1995 and 1994 second quarters were $183,000
and $260,000, respectively. Six months professional fees amounted to $514,000
this year against $601,000 last year.
Approximately 95% of the Company's revenue are from sales of licensed
products relating to Harley-Davidson, NASCAR, and Notre Dame for the six months
ended June 30, 1995 (Note 10). 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 decreased due to a significant reduction in sales
and collection of customer accounts.
Littlefield, Adams & Company, June 30, 1995 Form 10-Q; Page 16
<PAGE> 17
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 9 to the
interim Consolidated Financial Statements, which information
is incorporated herein by reference.
Littlefield, Adams & Company, June 30, 1995 Form 10-Q; Page 17
<PAGE> 18
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: August 11, 1995 /s/ DAVID M. SIMMONDS /s/
-------------------------------------------
David M. Simmonds
Chairman, President, Chief Executive Officer
(Principal Executive Officer)
Date: August 11, 1995 /s/ STANLEY I. HALBREICH /s/
-------------------------------------------
Stanley I. Halbreich
Chief Financial Officer, Treasurer
(Principal Financial & Accounting Officer)
Littlefield, Adams & Company, June 30, 1995 Form 10-Q; Page 18
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1995
<CASH> 37
<SECURITIES> 0
<RECEIVABLES> 1,639
<ALLOWANCES> 246
<INVENTORY> 4,003
<CURRENT-ASSETS> 6,125
<PP&E> 3,552
<DEPRECIATION> 2,237
<TOTAL-ASSETS> 8,059
<CURRENT-LIABILITIES> 5,601
<BONDS> 15
<COMMON> 2,296
0
0
<OTHER-SE> (1,370)
<TOTAL-LIABILITY-AND-EQUITY> 8,059
<SALES> 9,274
<TOTAL-REVENUES> 9,433
<CGS> 6,183
<TOTAL-COSTS> 6,183
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0<F1>
<INTEREST-EXPENSE> (153)
<INCOME-PRETAX> (122)
<INCOME-TAX> (32)
<INCOME-CONTINUING> (90)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (90)
<EPS-PRIMARY> (0.04)
<EPS-DILUTED> (0.04)
<FN>
<F1>
Bad debt expense of 12 is included in the 3,219 reported as Selling and
Administrative expenses.
</FN>
</TABLE>
