<PAGE>
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, 1999.
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: 0-20850
HAGGAR CORP.
(Exact name of the registrant as specified in the charter)
NEVADA 75-2187001
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
6113 LEMMON AVENUE
DALLAS, TEXAS 75209
(Address of principal executive offices)
TELEPHONE NUMBER (214) 352-8481
(Registrant's telephone number including area code)
Indicate by a 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 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 August 13, 1999, there were 7,185,393 shares of the Registrant's Common
Stock outstanding.
<PAGE>
HAGGAR CORP. AND SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
<S> <C>
Part I. Financial Information
Item 1. Financial Statements
Consolidated Statements of Operations
(Three and nine months ended June 30, 1999 and 1998) 3
Consolidated Balance Sheets
(As of June 30, 1999 and September 30, 1998) 4
Consolidated Statements of Cash Flows
(Nine months ended June 30, 1999 and 1998) 5
Notes to Consolidated Financial Statements 6-9
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 10-15
Item 3. Quantitative and Qualitative Disclosures about Market Risk 16
Part II. Other Information.
Item 6. Exhibits and Reports on Form 8-K 17
Signature 17
</TABLE>
2
<PAGE>
HAGGAR CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED, IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
June 30, June 30,
-------------------------- --------------------------
1999 1998 1999 1998
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net sales $ 107,215 $ 90,192 $ 312,272 $ 287,346
Cost of goods sold 71,946 61,577 209,627 198,403
----------- ----------- ----------- -----------
Gross profit 35,269 28,615 102,645 88,943
Selling, general and administrative expenses (32,339) (26,687) (95,916) (82,877)
Royalty income, net 569 482 1,798 1,570
----------- ----------- ----------- -----------
Operating income 3,499 2,410 8,527 7,636
Other income, net 338 469 1,224 739
Interest expense (966) (883) (2,865) (2,625)
----------- ----------- ----------- -----------
Income from operations before provision
for income taxes 2,871 1,996 6,886 5,750
Provision for income taxes 1,046 765 2,673 2,215
----------- ----------- ----------- ------------
Net income $ 1,825 $ 1,231 $ 4,213 $ 3,535
=========== =========== =========== ============
Basic and Diluted Net income per share $ 0.25 $ 0.14 $ 0.56 $ 0.41
=========== =========== =========== ============
Weighted average shares outstanding- Basic 7,235 8,567 7,523 8,567
=========== =========== =========== ============
Weighted average shares outstanding- Diluted 7,274 8,607 7,561 8,587
=========== =========== =========== ============
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements.
3
<PAGE>
HAGGAR CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
June 30,
1999 September 30,
(unaudited) 1998
----------- ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 5,936 $ 20,280
Accounts receivable, net 39,348 63,613
Due from factor 6,899 -
Inventories 96,186 92,244
Deferred tax benefit 12,561 7,623
Other current assets 5,511 1,557
----------- -----------
Total current assets 166,441 185,317
Property, plant, and equipment, net 60,661 64,424
Goodwill, net 28,414 -
Other assets 3,459 2,234
----------- -----------
Total Assets $ 258,975 $ 251,975
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 31,161 $ 22,995
Accrued liabilities 31,788 20,299
Accrued wages and other employee compensation 5,050 6,398
Accrued workers' compensation expense 5,419 4,564
Short-term borrowings - 3,453
Current portion of long-term debt 3,854 3,854
----------- -----------
Total current liabilities 77,272 61,563
Long-term debt 21,734 24,937
----------- -----------
Total liabilities 99,006 86,500
STOCKHOLDERS' EQUITY
Common stock - par value $0.10 per share; 25,000,000
shares authorized and 8,576,998 shares issued at
June 30, 1999 and September 30, 1998 857 857
Additional paid-in capital 41,860 41,860
Retained earnings 131,789 128,329
----------- -----------
174,506 171,046
Less - Treasury stock, 1,391,605 and 525,254 shares
at cost at June 30, 1999 and September 30, 1998 (14,537) (5,571)
----------- -----------
Total stockholders' equity 159,969 165,475
----------- -----------
Total Liabilities and Stockholders' Equity $ 258,975 $ 251,975
=========== ===========
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements.
4
<PAGE>
HAGGAR CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED, IN THOUSANDS)
<TABLE>
<CAPTION>
Nine Months Ended
June 30,
--------------------------
1999 1998
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 4,213 $ 3,535
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 10,042 9,614
Gain on disposal of property, plant, and equipment (578) (64)
Changes in assets and liabilities, net of effects
from the purchase of Jerell, Inc.:
Accounts receivable, net 24,160 25,292
Due from factor (1,069) -
Inventories 5,262 4,982
Deferred tax benefit (4,635) 382
Other current assets (3,584) 2,170
Accounts payable 3,978 (10,807)
Accrued liabilities 8,832 (5,014)
Accrued wages, workers' compensation and other
employee benefits (493) (1,879)
----------- -----------
Net cash provided by operating activities 46,128 28,211
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property, plant and equipment, net (5,158) (6,771)
Purchase of Jerell, Inc. (39,257) -
Proceeds from the sale of property, plant and equipment 1,336 99
Increase in other assets (555) (1,281)
----------- -----------
Net cash used in investing activities (43,634) (7,953)
CASH FLOWS FROM FINANCING ACTIVITIES
Net proceeds (payments) from short-term borrowings (3,453) 1,360
Purchase of Treasury stock at cost (8,966) -
Proceeds from issuance of long-term debt 33,000 18,000
Proceeds from issuance of common stock - 218
Payments on long-term debt (36,664) (21,340)
Payments of cash dividends (755) (1,280)
----------- -----------
Net cash used in financing activities (16,838) (3,042)
Increase (decrease) in cash and cash equivalents (14,344) 17,216
Cash and cash equivalents, beginning of period 20,280 2,176
----------- -----------
Cash and cash equivalents, end of period $ 5,936 $ 19,392
=========== ===========
Supplemental disclosure of cash flow information
Cash paid for:
Interest $ 4,079 $ 3,097
Income taxes $ 7,140 $ 817
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements.
5
<PAGE>
HAGGAR CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED FINANCIAL STATEMENTS.
The consolidated balance sheet as of June 30, 1999, the consolidated statements
of operations for the three and nine months ended June 30, 1999 and 1998, and
the consolidated statements of cash flows for the nine months ended June 30,
1999 and 1998, have been prepared by Haggar Corp. (the "Company") without audit.
In the opinion of management, all necessary adjustments (which include only
normal recurring adjustments) to present fairly the consolidated financial
position, results of operations, and cash flows of the Company at June 30, 1999,
and for all other periods presented, have been made. Certain information and
footnote disclosures normally included in the financial statements prepared in
accordance with generally accepted accounting principles have been omitted.
These financial statements should be read in conjunction with the financial
statements and accompanying footnotes in the Company's Annual Report on Form
10-K for the year ended September 30, 1998.
ACQUISITION
On January 13, 1999, the Company through its main operating subsidiary Haggar
Clothing Co., acquired Jerell, Inc., a company engaged in the design and
marketing of women's apparel, for an aggregate acquisition cost of $42.7
million. The acquisition cost consists of $36.9 million paid to the shareholders
of Jerell, $0.4 million as consideration for a covenant not to compete to an
executive officer, $4.7 million paid to a third party factor, and $0.7 million
in expenses attributable to the acquisition. In conjunction with the
acquisition, the Company received payments of notes receivable due from former
stockholders of Jerell, Inc. of $2.8 million and payments of $0.7 million from
former stockholders of Jerell, Inc. for tax withholdings, resulting in a net
acquisition cost of $39.3 million. The acquisition was accounted for under the
purchase method. Based on current estimates, which may be revised at a later
date, the excess consideration paid over the estimated fair value of net assets
acquired of approximately $29.1 million was recorded as goodwill and is being
amortized on a straight-line basis over its estimated useful life of 20 years.
The Company's consolidated financial statements have incorporated Jerell's
operating results from the effective date of the acquisition. The following
unaudited pro forma financial information combines the results of operations of
the Company and Jerell, Inc. as if the acquisition had taken place at the
beginning of fiscal 1998. These results are not intended to be a projection of
future results.
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) June 30, June 30,
--------------------------- ----------------------------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales $ 107,215 $ 106,210 $ 326,456 $ 320,601
Net income 1,825 1,291 3,205 3,927
Net Income per share - Basic and Diluted $ 0.25 $ 0.15 $ 0.56 $ 0.46
</TABLE>
In conjunction with the acquisition, liabilities were assumed as follows (in
thousands):
<TABLE>
<CAPTION>
<S> <C>
Fair value of assets acquired $46,665
Net cash paid for Jerell Inc. 39,257
-------
Liabilities assumed $ 7,408
========
</TABLE>
6
<PAGE>
CONCENTRATIONS OF CREDIT RISK.
Financial instruments which potentially expose the Company to concentrations of
credit risk, as defined by Statement of Financial Accounting Standards ("SFAS")
No. 105, "Disclosure of Information about Financial Instruments with Off-Balance
Sheet Risk and Financial Instruments with Concentrations of Credit Risk,"
consist primarily of trade accounts receivable. The Company's customers are not
concentrated in any specific geographic region but are concentrated in the
apparel industry. The Company's largest current customer, J.C. Penney Company,
Inc., accounted for 26.6% and 29.8% of the Company's net sales for the nine
months ended June 30, 1999 and 1998, respectively. The Company's second largest
current customer, Kohl's Department Stores, Inc., accounted for 13% and 10.3% of
the Company's net sales for the nine months ended June 30, 1999 and 1998,
respectively. No other customer accounted for more than 10% of the Company's net
sales. The Company performs ongoing credit evaluations of its customers'
financial condition and establishes an allowance for doubtful accounts based
upon factors surrounding the credit risk of specific customers, historical
trends, and other information.
DUE FROM FACTOR
Jerell, Inc., a subsidiary of Haggar Clothing Co., has a factoring agreement
with a factor for the purpose of providing credit administration. Under the
terms of the factoring agreement, the factor purchases substantially all of
Jerell's trade accounts receivable without recourse.
INVENTORIES.
Inventories are stated at the lower of cost (first-in, first-out) or market and
consisted of the following at June 30, 1999, and September 30, 1998 (in
thousands):
<TABLE>
<CAPTION>
June 30, September 30,
1999 1998
----------- ------------
<S> <C> <C>
Piece goods $ 7,971 $ 9,438
Trimmings & supplies 3,370 2,669
Work-in-process 19,091 11,390
Finished garments 65,754 68,747
----------- -----------
$ 96,186 $ 92,244
=========== ===========
</TABLE>
Work-in-process and finished garments inventories consisted of materials, labor
and manufacturing overhead.
7
<PAGE>
LONG-TERM DEBT.
Long-term debt consisted of the following at June 30, 1999, and September 30,
1998 (in thousands):
<TABLE>
<CAPTION>
June 30, September 30,
1999 1998
----------- -------------
<S> <C> <C>
Senior Notes Payable $ 21,429 $ 25,000
Industrial Development Revenue
Bonds with interest at a rate equal
to that of high-quality, short-term,
tax-exempt obligations, as defined
(3.85% at June 30, 1999),
payable in annual installments of
$100, and a final payment of $2,000
in 2005, secured by certain buildings
and equipment 2,600 2,700
Other 1,559 1,091
----------- -----------
25,588 28,791
Less - Current portion 3,854 3,854
----------- -----------
$ 21,734 $ 24,937
=========== ===========
</TABLE>
Net assets mortgaged or subject to lien under the Industrial Development Revenue
Bonds totaled approximately $972,720 at June 30, 1999.
As of June 30, 1999, the Company had a $100 million revolving credit line
agreement (the "Agreement") with certain banks. As of June 30, 1999, the
Company had additional available borrowing capacity of approximately $82.0
million. The Company incurred approximately $78,000 in commitment fees
related to the available borrowing capacity during the nine month period
ended June 30, 1999. The interest rates for the nine month period ended June
30, 1999, ranged from 5.58% to 7.75%. The facility will mature June 30, 2002,
with a one year renewal at the option of the banks and is unsecured, except
that the Company is prohibited from pledging its accounts receivable and
inventories during the term of the Agreement. The Agreement contains
limitations on incurring additional indebtedness and requires the maintenance
of certain financial ratios. The Agreement requires the Company and Haggar
Clothing Co. to maintain net worth, as defined in the Agreement, in excess of
$144,806,000 and $55,000,000, respectively, as of June 30, 1999. The
Agreement requires the Company to maintain a net worth in excess of the net
worth of the preceding fiscal year plus 50% of the Company's consolidated net
income. The Agreement prohibits the payment of any dividend if a default
exists after giving effect to such dividend.
CONTINGENCIES
HURRICANE
On September 22, 1998, Hurricane Georges damaged two of the Company's leased
manufacturing facilities. Both facilities are insured for damage to the
building, equipment, inventory, and for business interruption. Although the
total assessment of damage has not been completed, the Company recognized a gain
of $2.0 million related to the building and equipment claims in the third
quarter of fiscal 1999. The hurricane damage is not considered unusual or
extraordinary, therefore the gain was included in selling, general and
administrative expenses. The Company is in the process of finalizing the
inventory and business interruption losses. The range of loss is estimated to be
approximately $3.0 million to $5.0 million, substantially all of which is
expected to be covered by insurance.
8
<PAGE>
LAWSUIT
On April 28, 1999, a jury returned an approximate $3.6 million verdict against
Haggar Clothing Co. and in favor of a former employee relating to claims for
wrongful discharge and common law tort. Although the jury returned a verdict,
the court has not yet rendered judgment on such verdict. Therefore, the case is
presently neither final nor appealable.
The Company believes the verdict in this lawsuit was both legally and factually
incorrect. The Company filed and argued a motion requesting the court to render
judgment in favor of the Company notwithstanding the jury verdict. The court has
not ruled on this motion. If the jury verdict is not set aside or modified by
the trial court, the Company presently intends to appeal the judgment after it
is rendered by the court. The Company, however, is presently unable to determine
the likelihood of an unfavorable outcome to such motion or appeals.
NET INCOME PER COMMON SHARE AND COMMON SHARE EQUIVALENT.
Basic earnings per share excludes dilution and is computed by dividing net
income by the weighted-average number of common shares outstanding for the
period. Diluted earnings per share is computed by dividing net income by the sum
of the weighted-average number of common shares outstanding for the period and
the number of equivalent shares assumed outstanding under the Company's stock
based compensation plans.
Options to purchase 859,956 and 884,956 common shares at prices ranging from
$12.13 to $23.00 were not dilutive and were outstanding for the three and nine
months ended June 30, 1999. Options to purchase 220,999 common shares at prices
ranging from $15.88 to $23.00 were not dilutive and were outstanding for the
three and nine months ended June 30, 1998. These shares for the aforementioned
periods were not included in the diluted earnings per share calculation because
the options' exercise prices were greater than the average market price of the
common shares. Diluted earnings per share was calculated as follows (unaudited,
in thousands, except per share data):
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
June 30, June 30,
-------------------------- --------------------------
1999 1998 1999 1998
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net income (loss) to common stockholders $ 1,825 $ 1,231 $ 4,213 $ 3,535
Weighted average common shares outstanding 7,235 8,567 7,523 8,567
Shares equivalents, due to stock options 39 40 38 20
----------- ----------- ----------- -----------
7,274 8,607 7,561 8,587
=========== =========== =========== ===========
Net Income (loss) per share - Diluted $ 0.25 0.14 $0.56 0.41
=========== =========== =========== ===========
</TABLE>
SUBSEQUENT EVENTS.
Subsequent to June 30, 1999, the Company declared a cash dividend of $0.05 per
share payable to the stockholders of record on August 2, 1999. The dividend of
approximately $359,000 will be paid on or before August 16, 1999.
9
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the attached
consolidated financial statements and the notes thereto, and with the Company's
Annual Report on Form 10-K for the fiscal year ended September 30, 1998.
RESULTS OF OPERATIONS
On January 13, 1999, the Company completed its acquisition of Jerell, Inc., a
company engaged in the design and marketing of women's apparel. The Company's
consolidated financial statements incorporate Jerell's activity from the
effective date of the acquisition.
Net sales for the third quarter ended June 30, 1999, increased 18.9% to $107.2
million from $90.2 million for the third quarter of fiscal 1998. The increase in
net sales for the third quarter of fiscal 1999 is the combined result of a 12.5%
increase in unit sales, a 4.3% decrease in the average sales price, and the
inclusion of Jerell's net sales since the acquisition. Net sales for the nine
months ended June 30, 1999, increased 8.7% to $312.3 million compared to $287.3
million in the prior fiscal year. The increase in the first nine months of
fiscal 1999 was the result of a 5.4% increase in unit sales, a 3.5% decrease in
the average sales price, and the inclusion of Jerell's net sales since the
acquisition.
Gross profit as a percentage of net sales increased to 32.9% in the third
quarter of fiscal 1999 compared to 31.7% in the third quarter of the prior
fiscal year. Gross profit as a percentage of net sales for the first nine months
of fiscal 1999 increased to 32.9% compared to 31.0% in the first nine months of
fiscal 1998. The increase in gross profit is primarily the result of fewer
inventory markdowns and an improved manufacturing mix.
Selling, general and administrative expenses as a percentage of net sales
increased to 30.2% in the third quarter of fiscal 1999 compared to 29.6% in
the third quarter of fiscal 1998. Actual selling, general and administrative
expenses increased to $32.3 million in the third quarter of fiscal 1999
compared to $26.7 million in the same quarter in fiscal 1998. The $5.6
million increase relates to the inclusion of Jerell's operating expenses of
$4.0 million, increases in legal costs and contingencies of $1.5 million, the
opening and operating of new retail stores of $1.1 million, offset partially
by a $2.0 million gain related to insurance recoveries. For the nine months
ended June 30, 1999, selling, general and administrative expenses as a
percentage of net sales increased to 30.7% compared to 28.8% in the first
nine months of the prior fiscal year. Actual selling, general and
administrative expenses increased to $95.9 million for the nine months ended
June 30, 1999, compared to $82.9 million in the first nine months of the
prior fiscal year. The increase of $13.0 million in selling, general and
administrative expenses for the first nine months of fiscal 1999 compared to
fiscal 1998 includes a $2.5 million increase in advertising expenses, a $1.3
million increase related to the opening and operating of new retail stores,
and the inclusion of Jerell expenses since the acquisition. These increases
are offset by $1.0 million in lower shipping expenses. At the end of the
third quarter of fiscal 1999, 62 retail stores were open and operational as
compared to 52 stores at the end of the same period last year.
Other income decreased to $0.3 million in the third quarter of fiscal 1999
compared to $0.5 million in the same quarter last year. For the first nine
months of fiscal 1999, other income increased to $1.2 million compared to $0.7
million for the same period last year. The increase was primarily the result of
gains from the sales of miscellaneous sewing equipment.
In the third quarter of fiscal 1999 and 1998, the provisions for income taxes,
as a percentage of income before taxes, were 36.4% and 38.3%, respectively. For
the nine months ended June 30, 1999 and 1998, the provisions for income taxes,
as a percentage of income before taxes, were 38.8% and 38.5%, respectively. The
effective tax rate differed from the statutory federal rate of 34% primarily due
to state income taxes and the nondeductibility of goodwill amortization related
to the Jerell acquisition.
10
<PAGE>
The Company's third quarter of fiscal 1999 net income to common stockholders of
$1.8 million compares to a net income of $1.2 million in the third quarter of
fiscal 1998. Net income to common stockholders for the nine months ended June
30, 1999, was $4.2 million compared to a net income of $3.5 million for the nine
months ended June 30, 1998.
LIQUIDITY AND CAPITAL RESOURCES
The Company's trade accounts receivable potentially expose the Company to
concentrations of credit risks because most of its customers are in the retail
apparel industry. The Company performs ongoing credit evaluations of its
customers' financial condition and establishes an allowance for doubtful
accounts based upon the factors related to the credit risk of specific
customers, historical trends and other information. The Company's trade accounts
receivable, including amounts due from factor, decreased approximately $17.4
million to $46.2 million at June 30, 1999, from $63.6 million at September 30,
1998. This decrease in trade accounts receivable is mainly the result of
seasonal reductions in sales partially offset by the inclusion of Jerell's trade
receivables.
Inventories as of June 30, 1999, increased to $96.2 million from $92.2 million
at September 30, 1998. The increased inventory as of June 30, 1999, is due to
the inclusion of Jerell's inventory.
As of June 30, 1999, the Company had a revolving credit line facility with
certain banks with additional available borrowing capacity of approximately
$82.0 million. The Company incurred approximately $78,000 in commitment fees
related to the available borrowing capacity for the nine months ended June 30,
1999. The interest rates for the quarter ended June 30, 1999, ranged from 5.58%
to 7.75%. The facility will mature June 30, 2001, with a one year renewal at the
option of the banks.
For the nine months ended June 30, 1999, the Company provided cash from
operating activities of approximately $46.1 million (net of effects from the
purchase of Jerell, Inc.). The cash provided is primarily the result of a $24.2
million decrease in accounts receivable, an $8.8 million increase in accrued
liabilities and a $5.3 million decrease in inventories, offset by a $4.6 million
increase in deferred tax benefits and $3.6 million increase in other current
assets. For the same period last year, the Company provided cash from operating
activities of $28.2 million primarily from a $25.3 million decrease in accounts
receivable offset by a $10.8 million decrease in accounts payable.
The Company used approximately $43.6 million in investing activities for the
nine months ended June 30, 1999. The Company purchased property, plant and
equipment of $5.2 million and acquired Jerell for $39.3 million during the nine
months ended June 30, 1999. For the nine months ended June 30, 1998, investing
activities used approximately $7.9 million in cash flow, primarily as the result
of purchasing property, plant and equipment.
Cash flows used in financing activities of $16.8 million for the nine months
ended June 30, 1999, were primarily the result of a net payment of long-term
debt of $3.7 million, the $3.5 million payment of short-term borrowings and the
purchase of $9.0 million in treasury stock. Comparatively, cash flows used in
financing activities for the same period last year, were primarily the result of
a $3.3 million net decrease in long-term debt.
The Company believes that the cash flow generated from operations and the funds
available under the foregoing credit facilities will be adequate to meet its
working capital and related financing needs for the foreseeable future.
11
<PAGE>
YEAR 2000 CONSIDERATIONS
GENERAL. The Year 2000 issue concerns the inability of some computerized systems
to properly process date-sensitive information on and after January 1, 2000,
because of the use of only the last two digits to identify a year. The Company
has a full-time project manager coordinating the assessment and remediation of
Year 2000 issues affecting the Company. The project manager and team leaders
from various areas within the Company continue to implement a plan to accomplish
the remediation necessary to prepare the Company for the Year 2000. The Year
2000 steering committee, composed of members from various functional groups,
provides oversight by reviewing and evaluating the progress of the Year 2000
program. The Company presently expects that all of its core operations and
essential functions will be ready for the Year 2000 transition.
STATE OF READINESS. The Company's Year 2000 program classifies all of its
computerized systems into the following categories:
BUSINESS SYSTEMS: This category consists of computer programs that
run the Company's primary business functions (e.g., manufacturing,
order processing, inventory control and accounting).
HARDWARE/PC SOFTWARE: This category consists of all computer
hardware and operating systems (including networking,
telecommunications and other PC-based software applications).
ENGINEERING SYSTEMS: This category consists of manufacturing,
distribution and laboratory equipment (including sewing equipment,
cutters, conveyors and scanners) that control the manufacturing
process.
FACILITIES SYSTEMS: This category consists of systems that support
the physical infrastructure of the Company's facilities (including
forklifts, ovens, boilers, HVAC and security systems).
In order to establish priorities for assessment and remediation of Year 2000
issues, each of the systems within these categories has been further classified
as follows:
CRITICAL: These are systems without which the Company's business
would be severely adversely affected (e.g., manufacturing,
distribution and retail point of sale).
PRIORITY: These are systems that the Company could do without for
only a few days without materially adversely affecting operations
(e.g., telecommunications and energy management).
REQUIRED: These are systems needed to remain competitive or in
compliance with regulatory requirements (e.g., voice mail and
executive information systems).
DESIRABLE: These systems enable employees to work more efficiently
(e.g., pagers, fax machines and postage meters).
12
<PAGE>
The approximate percentage of completion of remediation within each system
category and priority level as of August 4, 1999, are set forth in the table
below for the Company, excluding Jerell.
<TABLE>
<CAPTION>
CRITICAL (%) PRIORITY (%) REQUIRED (%) DESIRABLE (%)
-------- -------- -------- ---------
<S> <C> <C> <C> <C>
Business Systems
96 99 100 N/A
Hardware/PC
Software 86 86 98 100
Engineering Systems 93 85 96 99
Facilities Systems 100 100 100 100
</TABLE>
Overall, the Company's excluding Jerell Year 2000 compliance program was
approximately 93% complete as of August 4, 1999, and was substantially on
schedule with the program plan, as compared to 74% complete as of April 28,
1999.
The approximate percentage of completion of remediation within each system
category and priority level as of August 4, 1999, are set forth in the table
below for Jerell.
<TABLE>
<CAPTION>
CRITICAL (%) PRIORITY (%) REQUIRED (%) DESIRABLE (%)
-------- -------- -------- ---------
<S> <C> <C> <C> <C>
Business Systems 99 99 100 96
Hardware/PC
Software 64 87 27 72
Engineering Systems 71 N/A N/A N/A
Facilities Systems 84 100 58 100
</TABLE>
Overall, Jerell's Year 2000 compliance program was approximately 84% complete as
of August 4, 1999, as compared to 43% complete as of April 28, 1999, and was
substantially on schedule with the program plan.
In addition to its internal Year 2000 compliance program, the Company has
requested information from a majority of its customers and vendors concerning
their Year 2000 compliance. Responses have been received from most key customers
indicating that they do not presently anticipate any significant Year 2000
problems. The Company received responses from most of its key vendors indicating
that they do not presently anticipate any significant Year 2000 problems. The
Company intends to continue to communicate with its key customers and vendors as
more information becomes available in order to further evaluate potential risks
to the Company's business operations. This portion of the Jerell program should
be completed in the fourth quarter of fiscal 1999.
13
<PAGE>
COSTS TO ADDRESS YEAR 2000 ISSUES. The Company is executing its Year 2000
program primarily with existing internal resources. The principal costs
associated with these internal resources are payroll and employee benefits of
the information systems group. However, the Company does not separately track
the internal costs attributable to the Year 2000 program.
The Company has also incurred costs for contract programmers and systems
upgrades in connection with its Year 2000 program. As a result of Year 2000
issues, the Company has elected to upgrade its accounting, order processing,
manufacturing, and electronic data interchange software; retail store
systems; distribution conveyor systems; and most PC hardware and software
systems. No other significant projects have been accelerated or deferred due
to Year 2000 issues. The costs of these programmers and upgrades have not
been, and are not expected to be in the future, material to the results of
operations or the financial condition of the Company. All costs of Year 2000
compliance are recorded in the period incurred.
RISKS OF YEAR 2000 ISSUES. The Company does not presently anticipate any
considerable delays or exceptions to the scheduled substantial completion of its
Year 2000 program by the end of August 1999 for Haggar and September 1999 for
Jerell. Therefore, any adverse consequences from Year 2000 issues would result
from presently unforeseen circumstances.
Although the Company believes that it is adequately addressing the Year 2000
issue, there can be no assurance that Year 2000 problems will not have a
material adverse affect on its business, financial condition or results of
operations. In addition, disruptions in the economy generally resulting from
Year 2000 failures or the public's perceptions of failures could have a material
adverse affect on the Company.
CONTINGENCY PLANS. During the third quarter of fiscal 1999, the Company,
excluding Jerell, developed contingency plans for potential risks such as
interruptions in supply chain, transportation delays and communications
breakdowns with foreign vendors. Contingency plans for Jerell will be finalized
in the fourth quarter of fiscal 1999. The Company generated risk analysis
reports from the testing of systems and the responses received from customers
and vendors. The reports were divided between internal and external risks.
The internal risks relate to the Company's systems and facilities. The Company
conducted extensive testing, which assured the Company that date changes will
not affect its systems before, during or after January 1, 2000. Although the
Company does not anticipate any problems with its systems, there will be
increased MIS staff coverage from December 30, 1999, to January 15, 2000, and
longer, if necessary. In addition, facilities staff will be on site during the
January 1 weekend to confirm that building and mechanical systems are operating
as expected.
The external risk categories covered in the reports are customers, importers,
piece goods and trim suppliers, manufacturing contractors, licensees,
transportation and utility vendors. The Company's senior managers used risk
analysis reports to develop contingency plans where necessary. A summary of the
plans follows:
CUSTOMERS: All of the Company's major customers have indicated that
they will be ready for the Year 2000. Year 2000 testing has confirmed
that the Company can accept orders into the year 2000 in the formats
used by all EDI trading partners. As a result, the Company has not
developed a contingency plan related to customers.
IMPORTERS: The majority of the Company's importers have indicated that
they will be ready for the Year 2000. A review of the Company's normal
processes indicates no need for a contingency plan.
14
<PAGE>
PIECE GOODS AND TRIM SUPPLIERS: The majority of the Company's key
suppliers have indicated that they will be ready for the Year 2000. A
review of the Company's normal processes indicates no need for a
contingency plan.
MANUFACTURING CONTRACTORS: All of the contractors have replied that
they will be ready for the Year 2000. In addition, although ordinarily
the plants are closed at the end of December for the holidays,
arrangements have been made to work throughout December.
LICENSEES: All of the Company's licensees that replied indicated that
they will be ready for the Year 2000. Those that have not replied
either have immaterial volumes or are close enough geographically that
the Company could supply the licensee's customers if necessary.
TRANSPORTATION: 90% of the Company's freight is handled by carriers
that have advised that they are or will be compliant before December
31, 1999. Plans have been made regarding alternative shipping for
customers that request a specific carrier if that carrier is unable to
transport a shipment when needed.
UTILITIES: The utility companies for the Company's U.S. facilities have
responded that they will be ready, although they will not guarantee
100% compliance. The fuel storage tanks diesel-electric generators at
both of the Dominican Republic plants and the Company-owned Mexico
plant will be filled before December 20, 1999. The Company has
developed a detailed back-up plan for handling activities normally
accomplished by data transmission in case there is a disruption in
international telecommunications service.
FORWARD LOOKING STATEMENTS.
This report contains certain forward-looking statements. In addition, from time
to time the Company may issue press releases and other written communications,
and representatives of the Company may make oral statements, which contain
forward-looking information. Except for historical information, matters
discussed in such oral and written communications are forward-looking statements
that involve risks and uncertainties which could cause actual results to differ
materially from those in such forward-looking statements.
Risks and uncertainties inherent to the Company's line of business include such
factors as natural disasters, general economic conditions, the performance of
the retail sector in general and the apparel industry in particular, the
competitive environment, consumer acceptance of new products, and the success of
advertising, marketing and promotional campaigns. Additional risks and
uncertainties which could cause the Company's actual results to differ from
those contained in any forward-looking statements are discussed elsewhere
herein.
15
<PAGE>
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
The Company is exposed to market risk from changes in interest rates, which may
adversely affect its financial position, results of operations and cash flows.
In seeking to minimize the risks from interest rate fluctuations, the Company
manages exposures through its regular operating and financing activities. The
Company does not use financial instruments for trading or other speculative
purposes and is not party to any derivative financial instruments. The Company
is exposed to interest rate risk primarily though its borrowing activities. As
of June 30, 1999, the Company had no outstanding debt under its revolving credit
line agreement and $22 million in senior notes payable. See Item 1. - Notes to
Consolidated Financial Statements - Long-term Debt for additional discussion of
the terms of the Company's credit facility and the senior notes payable. The
fair values of the borrowings under the revolving credit line and the senior
notes approximate the carrying values of the respective obligations.
16
<PAGE>
PART II. OTHER INFORMATION.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
a) Exhibit 10 Sixth Amendment to First Amended and Restated Credit
Agreement dated May 28, 1999, between the Company and
Chase Bank of Texas, as agent for a bank syndicate.
b) Exhibit 27 Financial Data Schedule
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.
Haggar Corp.,
Date: August 13, 1999 By: /s/ DAVID M. TEHLE
-----------------------------
David M. Tehle
Senior Vice President,
Chief Financial Officer
Signed on behalf of the
registrant and as principal
financial officer.
17
<PAGE>
SIXTH AMENDMENT TO
FIRST AMENDED AND RESTATED CREDIT AGREEMENT
This SIXTH AMENDMENT TO FIRST AMENDED AND RESTATED CREDIT AGREEMENT
(this "AGREEMENT") is entered into as of May 28, 1999 (the "EFFECTIVE DATE"),
by and among Haggar Clothing Co., a Nevada corporation, f/k/a Haggar Apparel
Company (the "COMPANY"), Haggar Corp., a Nevada corporation ("HAGGAR"), the
banks listed on the signature pages of this Agreement (collectively, the
"BANKS"), Chase Bank of Texas, National Association, a national banking
association, f/k/a Texas Commerce Bank National Association, individually and
as agent (the "AGENT") for the Banks, and is consented to by Haggar and the
domestic subsidiaries of the Company listed on the signature pages of this
Agreement (collectively, the "SUBSIDIARIES").
R E C I T A L S :
WHEREAS, pursuant to that certain First Amended and Restated Credit
Agreement (as heretofore and herein amended, the "CREDIT AGREEMENT") dated as
of September 18, 1996, executed by and among the Company, Haggar, the Banks
and the Agent, the Banks agreed to make advances to the Company on certain
terms and conditions set forth therein (each capitalized term used but not
defined herein shall have the meaning given to such term in the Credit
Agreement, as amended); and
WHEREAS, the Credit Agreement has been amended by that certain First
Amendment to First Amended and Restated Credit Agreement dated as of December
31, 1996, that certain Second Amendment to First Amended and Restated Credit
Agreement dated as of June 30, 1998, that certain Third Amendment to First
Amended and Restated Credit Agreement dated as of December 15, 1997, that
certain Fourth Amendment to First Amended and Restated Credit Agreement dated
as of June 30, 1998, and that certain Fifth Amended and Restated Credit
Agreement dated as of December 29, 1998; and
WHEREAS, the Company has requested that the Credit Agreement be
amended to, among other things, modify the Tangible Net Worth Covenant; and
WHEREAS, the Agent and the Banks are agreeable to such request under
the present circumstances and upon the terms and conditions as set forth
below.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements herein contained, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged and confessed, the
Company, Haggar, the Banks and the Agent hereby agree as follows:
SIXTH AMENDMENT TO FIRST AMENDED AND RESTATED CREDIT AGREEMENT Page 1
<PAGE>
A G R E E M E N T:
1. AMENDMENT TO DEFINITIONS. The definition of Tangible Net Worth is
hereby deleted in its entirety from Section 1.1 of the Credit Agreement:
2. NET WORTH. SECTION 7.8 of the Credit Agreement is hereby amended
and restated in its entirety to read as follows:
7.8 NET WORTH.
(a) Permit Net Worth of the Company Group to be or
become less than an amount equal to the sum of (1)
$144,806,000, plus (2) fifty percent (50%) of the cumulative
net income of the Company Group, on a consolidated basis, for
the period commencing March 31, 1999, and ending September 30,
1999, and each subsequently completed fiscal year, plus (3) in
the event Haggar or the Company shall make a registered public
offering of its capital stock, sixty-six and two-thirds
percent (66-2/3%) of that portion of the net proceeds from
such offering attributable to the primary issuance of new
shares (but not the secondary issuance of existing shares).
(b) Permit Net Worth of the Company to be or become
less than $55,000,000.
(c) Notwithstanding the foregoing, in the event that
Net Worth is less than the amount required hereby, the Company
shall have a period of ten (10) days from the earlier of the
date on which Net Worth is disclosed to the Agent or is to be
disclosed to the Agent under Section 6.1 in which to cause Net
Worth to be in compliance with the terms hereof. Cumulative
net income shall be determined by reference to the statements
of income described in Section 6.1(a) and shall not be
decreased by any losses occurring during any fiscal year.
3. COMPLIANCE CERTIFICATE. The first annex to the Compliance
Certificate attached to the Credit Agreement as EXHIBIT G is hereby deleted
and replaced in its entirety with SCHEDULE I attached hereto.
4. CERTIFICATES. This Agreement shall be effective as of the date
first above written when executed by all parties hereto and consented to by
the Guarantors as provided on the signature pages hereto, and upon receipt by
the Agent of the following, each in form, substance and bearing a date
satisfactory to the Agent and its counsel:
(a) A certificate of the Secretary or Assistant Secretary of
the Company and the Guarantors, respectively, certifying (i) that,
except as indicated therein, there has been no change to the articles
of incorporation or bylaws of the Company or the Guarantors since the
same were furnished to the Agent in connection with the execution of
the Credit Agreement,
SIXTH AMENDMENT TO FIRST AMENDED AND RESTATED CREDIT AGREEMENT Page 2
<PAGE>
(ii) as to the name and title of the officers of the Company and the
Guarantors and the authority of such officers to execute this
Agreement; and (iii) as to the existence and good standing in their
respective states of incorporation of the Company and the Guarantors.
(b) A certificate, signed by the Treasurer of the Company or
the Chief Financial Officer of the Company, stating that as of the date
of this Agreement and after giving effect to this Agreement the
statements set forth in Sections 4.2(a), (b) and (g) of the Credit
Agreement are true and correct.
5. EFFECTIVENESS OF DOCUMENTS. Except as expressly modified hereby,
all terms, provisions, representations, warranties, covenants and agreements
of the Company and Haggar related to the Loans, whether contained in the
Notes, the Credit Agreement and/or any of the other Loan Documents, are
hereby ratified and confirmed by the Company and Haggar, and all such
agreements shall be and shall remain in full force and effect, enforceable in
accordance with their terms.
6. NO CLAIMS OR DEFENSES. Each of the Company and Haggar, by the
execution of this Agreement, hereby declares that it has no offsets, claims,
counterclaims, defenses or other causes of action against the Agent or the
Banks related to any Loan, the Credit Agreement, any of the other Loan
Documents or the modification of the Credit Agreement pursuant to this
Agreement.
7. AUTHORITY. Each of the Company and Haggar represents and warrants
that all requisite corporate action necessary for it to enter into this
Agreement has been taken.
8. BINDING AGREEMENT. This Agreement shall be binding upon, and
shall inure to the benefit of, each party hereto and such party's legal
representatives, successors and assigns.
9. ENTIRE AGREEMENT. THIS AGREEMENT AND THE LOAN DOCUMENTS REPRESENT
THE FINAL AGREEMENT AMONG THE PARTIES HERETO AND MAY NOT BE CONTRADICTED BY
EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS AMONG THE
PARTIES HERETO. THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONG THE PARTIES
HERETO.
10. CHOICE OF LAW. THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE
WITH THE INTERNAL LAWS (AND NOT THE LAW OF CONFLICTS) OF THE STATE OF TEXAS,
BUT GIVING EFFECT TO FEDERAL LAWS APPLICABLE TO NATIONAL BANKS.
11. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one agreement, and
any of the parties hereto may execute this Agreement by signing any such
counterpart.
[SEE SIGNATURES ON ATTACHED PAGES]
SIXTH AMENDMENT TO FIRST AMENDED AND RESTATED CREDIT AGREEMENT Page 3
<PAGE>
EXECUTED as of the date first above written.
HAGGAR CLOTHING CO., a Nevada corporation,
f/k/a Haggar Apparel Company
By: /s/ J.M. Haggar
---------------------------------------
J.M. Haggar, III
Chief Executive Officer
HAGGAR CORP., a Nevada corporation
By: /s/ J.M. Haggar
---------------------------------------
J.M. Haggar, III
Chief Executive Officer
THE BANKS CHASE BANK OF TEXAS, NATIONAL ASSOCIATION,
f/k/a TEXAS COMMERCE BANK National Association,
$22,222,222.22 Individually, as the Agent
By:
---------------------------------------
Mae Kantipong-Reeves
Vice President
$22,222,222.22 NATIONSBANK, N.A.,
successor-in-interest by merger to
NationsBank of Texas, N.A.
By:
---------------------------------------
Leesa C. Sluder
Senior Vice President
SIXTH AMENDMENT TO FIRST AMENDED AND RESTATED CREDIT AGREEMENT Page 4
<PAGE>
$18,518,518.51 COMERICA BANK - TEXAS
By:
---------------------------------------
Paul L. Strange
Vice President
$11,111,111.12 THE FIRST NATIONAL BANK OF CHICAGO
By:
---------------------------------------
Thomas Freas
Vice President
$14,814,814.81 THE BANK OF TOKYO-MITSUBISHI, LTD.,
DALLAS OFFICE
By:
---------------------------------------
Douglas M. Barnell
Vice President
$11,111,111.12 NATIONAL CITY BANK, KENTUCKY,
f/k/a First National Bank of Louisville
By:
---------------------------------------
Donald R. Pullen, Jr.
Vice President
SIXTH AMENDMENT TO FIRST AMENDED AND RESTATED CREDIT AGREEMENT Page 5
<PAGE>
CONSENT OF HAGGAR
Haggar hereby (a) acknowledges its consent to this Agreement, (b)
ratifies and confirms all terms and provisions of the Parent Guaranty , (c)
agrees that the Parent Guaranty is and shall remain in full force and effect,
(d) acknowledges that there are no claims or offsets against, or defenses or
counterclaims to, the terms and provisions of and the obligations created and
evidenced by the Parent Guaranty, (e) reaffirms all agreements and
obligations under the Parent Guaranty with respect to the Loans, the Notes,
the Credit Agreement and all other documents, instruments or agreements
governing, securing or pertaining to the Loans, as the same may be modified
by this Agreement, and (f) represents and warrants that all requisite
corporate action necessary for it to execute this Agreement has been taken.
HAGGAR CORP.,
a Nevada corporation
By: /s/ J.M. Haggar
---------------------------------------
J.M. Haggar, III
Chief Executive Officer
Dated as of May 28, 1999.
SIXTH AMENDMENT TO FIRST AMENDED AND RESTATED CREDIT AGREEMENT Page 6
<PAGE>
CONSENT OF DOMESTIC SUBSIDIARIES
Each of the undersigned Subsidiaries hereby (a) acknowledges its
consent to this Agreement, (b) ratifies and confirms all terms and provisions
of the Subsidiary Guaranty to which it is a signatory, (c) agrees that the
Subsidiary Guaranty to which it is a signatory is and shall remain in full
force and effect, (d) acknowledges that there are no claims or offsets
against, or defenses or counterclaims to, the terms and provisions of and the
obligations created and evidenced by the Subsidiary Guaranty to which it is a
signatory, (e) reaffirms all agreements and obligations under the Subsidiary
Guaranty to which it is a signatory with respect to the Loans, the Notes, the
Credit Agreement and all other documents, instruments or agreements
governing, securing or pertaining to the Loans, as the same may be modified
by this Agreement, and (f) represents and warrants that all requisite
corporate action necessary for it to execute this Agreement has been taken.
BOWIE MANUFACTURING COMPANY,
a Nevada corporation
By: /s/ J.M. Haggar
-------------------------------------
J.M. Haggar, III
Chairman/Chief Executive Officer
CORSICANA COMPANY,
a Nevada corporation
By: /s/ J.M. Haggar
-------------------------------------
J.M. Haggar, III
Chairman/Chief Executive Officer
SIXTH AMENDMENT TO FIRST AMENDED AND RESTATED CREDIT AGREEMENT Page 7
<PAGE>
DALLAS PANT MANUFACTURING COMPANY,
a Nevada corporation
By: /s/ J.M. Haggar
-------------------------------------
J.M. Haggar, III
Chairman/Chief Executive Officer
GREENVILLE PANT MANUFACTURING
COMPANY, a Nevada corporation
By: /s/ J.M. Haggar
-------------------------------------
J.M. Haggar, III
Chairman/Chief Executive Officer
MCKINNEY PANT MANUFACTURING COMPANY,
a Nevada corporation
By: /s/ J.M. Haggar
-------------------------------------
J.M. Haggar, III
Chairman/Chief Executive Officer
OLNEY MANUFACTURING COMPANY,
a Nevada corporation
By: /s/ J.M. Haggar
-------------------------------------
J.M. Haggar, III
Chairman/Chief Executive Officer
WAXAHACHIE GARMENT COMPANY,
a Nevada corporation
By: /s/ J.M. Haggar
-------------------------------------
J.M. Haggar, III
Chairman/Chief Executive Officer
SIXTH AMENDMENT TO FIRST AMENDED AND RESTATED CREDIT AGREEMENT Page 8
<PAGE>
LA ROMANA MANUFACTURING CORPORATION,
a Nevada corporation
By: /s/ J.M. Haggar
-------------------------------------
J.M. Haggar, III
Chairman/Chief Executive Officer
HAGGAR SERVICES, INC.,
a Texas corporation
By: /s/ J.M. Haggar
-------------------------------------
J.M. Haggar, III
Chairman/Chief Executive Officer
AIRHAGGAR, INC., f/k/a HAGAIR, INC.,
a Texas corporation
By: /s/ J.M. Haggar
-------------------------------------
J.M. Haggar, III
Chairman/Chief Executive Officer
DUNCAN MANUFACTURING COMPANY,
an Oklahoma corporation
By: /s/ J.M. Haggar
-------------------------------------
J.M. Haggar, III
Chairman/Chief Executive Officer
SIXTH AMENDMENT TO FIRST AMENDED AND RESTATED CREDIT AGREEMENT Page 9
<PAGE>
WESLACO CUTTING, INC.,
a Nevada corporation
By: /s/ J.M. Haggar
-------------------------------------
J.M. Haggar, III
Chairman/Chief Executive Officer
WESLACO SEWING, INC.,
a Nevada corporation
By: /s/ J.M. Haggar
-------------------------------------
J.M. Haggar, III
Chairman/Chief Executive Officer
HAGGAR DIRECT, INC.,
a Nevada corporation
By: /s/ J.M. Haggar
-------------------------------------
J.M. Haggar, III
Chairman/Chief Executive Officer
JERELL, INC.,
a Nevada corporation
By: /s/ J.M. Haggar
-------------------------------------
J.M. Haggar, III
Chairman/Chief Executive Officer
SIXTH AMENDMENT TO FIRST AMENDED AND RESTATED CREDIT AGREEMENT Page 10
<PAGE>
SAN GABRIEL ENTERPRISES, INC.,
a Texas corporation
By: /s/ J.M. Haggar
-------------------------------------
J.M. Haggar, III
Chairman/Chief Executive Officer
MULTIPLES U.S.A., INC.,
a Texas corporation
By: /s/ J.M. Haggar
-------------------------------------
J.M. Haggar, III
Chairman/Chief Executive Officer
Dated as of May 28, 1999.
SIXTH AMENDMENT TO FIRST AMENDED AND RESTATED CREDIT AGREEMENT Page 11
<PAGE>
ANNEX TO COMPLIANCE CERTIFICATE
<TABLE>
<CAPTION>
- ------------------------------------------------------------------
COVENANT REQUIRED LEVEL CURRENT STATUS
- ------------------------------------------------------------------
<S> <C> <C>
Funded Debt Ratio 3.50 to 1.00 _______ to 1.00
- ------------------------------------------------------------------
Net Worth Company Group ____________(1) $____________
- ------------------------------------------------------------------
Net Worth Company $55,000,000 $____________
- ------------------------------------------------------------------
Inventory Turns 2.0 _____________
- ------------------------------------------------------------------
Fixed Charge Ratio 1.25 to 1.00 _______ to 1.00
- ------------------------------------------------------------------
</TABLE>
- --------
(1) Show required level based on calculations in SECTION 7.8(a).
SIXTH AMENDMENT TO FIRST AMENDED AND RESTATED CREDIT AGREEMENT Page 12
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AND CONSOLIDATED STATEMENTS OF INCOME FILED AS PART
OF SUCH FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000892533
<NAME> HAGGAR CORP
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1999
<PERIOD-START> OCT-01-1998
<PERIOD-END> JUN-30-1999
<CASH> 5,936
<SECURITIES> 0
<RECEIVABLES> 48,490
<ALLOWANCES> 2,243
<INVENTORY> 96,186
<CURRENT-ASSETS> 166,441
<PP&E> 140,379
<DEPRECIATION> 79,718
<TOTAL-ASSETS> 258,975
<CURRENT-LIABILITIES> 77,272
<BONDS> 0
0
0
<COMMON> 857
<OTHER-SE> 159,969
<TOTAL-LIABILITY-AND-EQUITY> 258,975
<SALES> 312,272
<TOTAL-REVENUES> 312,272
<CGS> 209,627
<TOTAL-COSTS> 94,118
<OTHER-EXPENSES> (1,224)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,865
<INCOME-PRETAX> 6,886
<INCOME-TAX> 2,673
<INCOME-CONTINUING> 4,213
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,213
<EPS-BASIC> 0.56<F1>
<EPS-DILUTED> 0.56<F1>
<FN>
<F1>THE EARNINGS PER SHARE INFORMATION HAS BEEN PREPARED IN ACCORDANCE WITH SFAS
NO. 128 AND BASIC AND DILUTED EARNINGS PER SHARE HAVE BEEN ENTERED IN PLACE OF
PRIMARY AND FULLY DILUTED RESPECTIVELY.
</FN>
</TABLE>
