SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(MARK ONE)
( X ) QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended March 28, 1998
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 No. 33-87392
HOSIERY CORPORATION OF AMERICA, INC.
------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 36-0782950
- ---------------------------------- -----------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
3369 Progress Drive
Bensalem, Pennsylvania 19020
- ---------------------------------------- ------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (215) 244-1777
Indicate by check mark whether the Registrant (1) has filed all reports required
by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports) and (2) has been subject to such filing requirements for
the past 90 days.
Yes X No
--------------- ---------------
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 May 7, 1998
- ---------------------------- ------------------------------
Voting 1,332,830
Class A, non-voting 75,652
<PAGE>
INDEX PAGE
- ----- ----
PART I - FINANCIAL INFORMATION
- ------------------------------
Item 1. Condensed Consolidated Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets
March 28, 1998 and December 31, 1997 3
Condensed Consolidated Statements of Operations
Three month periods ended March 28, 1998 and March 29, 1997 4
Condensed Consolidated Statements of Cash Flows
Three month periods ended March 28, 1998 and March 29, 1997 5
Notes to Condensed Consolidated Financial Statements 6-7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 8-11
PART II - OTHER INFORMATION 12-13
- ---------------------------
SIGNATURES 14
2
<PAGE>
Item 1. Condensed Consolidated Financial Statements
- ----------------------------------------------------
<TABLE>
HOSIERY CORPORATION OF AMERICA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
MARCH 28, 1998 AND DECEMBER 31, 1997
(Dollars in thousands, except per share data)
<CAPTION>
March 28, December 31,
1998 1997
ASSETS --------- ------------
CURRENT ASSETS: (Unaudited)
<S> <C> <C>
Cash and cash equivalents ......................................................................... $ -- $ 4,327
Accounts receivable, less an allowance for doubtful accounts of
$1,819 and $1,448 in 1998 and 1997, respectively ................................................. 24,772 24,180
Inventories ....................................................................................... 15,647 15,158
Prepaid and other current assets .................................................................. 2,184 2,398
--------- ---------
Total current assets .......................................................................... 42,603 46,063
PROPERTY AND EQUIPMENT, net ............................................................................ 16,836 17,261
DEFERRED CUSTOMER ACQUISITION COSTS .................................................................... 35,690 30,795
DEFERRED DEBT ISSUANCE COSTS, less accumulated amortization of
$5,670 and $5,316 in 1998 and 1997, respectively .................................................. 5,730 6,084
OTHER ASSETS ........................................................................................... 421 397
--------- ---------
TOTAL .................................................................................................. $ 101,280 $ 100,600
========= =========
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
CURRENT LIABILITIES:
Current portion of long-term debt ................................................................. $ 2,367 $ 3,117
Current portion of capital lease obligations ...................................................... 1,508 1,550
Bank overdrafts ................................................................................... 1,758 --
Accounts payable .................................................................................. 9,572 7,120
Accrued expenses and other current liabilities .................................................... 4,786 5,366
Accrued interest .................................................................................. 2,186 4,608
Accrued coupon redemption costs ................................................................... 4,602 4,568
Deferred income taxes ............................................................................. 7,402 7,279
--------- ---------
Total current liabilities .................................................................... 34,181 33,608
LONG-TERM DEBT, Less current portion ................................................................... 128,836 129,307
CAPITAL LEASE OBLIGATIONS, Less current portion ........................................................ 4,227 4,591
ACCRUED COUPON REDEMPTION COSTS ........................................................................ 411 429
DEFERRED INCOME TAXES .................................................................................. 4,076 3,876
--------- ---------
Total liabilities ............................................................................ 171,731 171,811
--------- ---------
COMMITMENTS AND CONTINGENT LIABILITIES
REDEEMABLE EQUITY SECURITIES ........................................................................... 901 872
--------- ---------
STOCKHOLDERS' DEFICIENCY:
Preferred stock, $.01 par value, 12,000,000 shares authorized:
4,000,000 shares designated as pay-in-kind preferred stock, stated at
liquidation value of $10 per share; 25% cumulative, (liquidation preference
of $83,221 and $79,838 in 1998 and 1997, respectively), 3,739,782 shares
issued and outstanding .......................................................................... 37,398 37,398
Common stock, voting, $.01 par value: 3,000,000 shares authorized,
1,321,522 shares issued and outstanding ......................................................... 13 13
Common stock, Class A, non-voting, $.01 par value:
500,000 shares authorized, 75,652 shares issued and outstanding ................................. 1 1
Additional paid-in capital ........................................................................ 16,536 16,565
Compensatory stock options outstanding ............................................................ 22,938 22,938
Accumulated deficit ............................................................................... (147,604) (148,301)
Restricted stock .................................................................................. (634) (697)
--------- ---------
Stockholders' deficiency ........................................................................ (71,352) (72,083)
--------- ---------
TOTAL .................................................................................................. $ 101,280 $ 100,600
========= =========
<FN>
See notes to condensed consolidated financial statements.
</FN>
</TABLE>
3
<PAGE>
<TABLE>
HOSIERY CORPORATION OF AMERICA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTH PERIODS ENDED MARCH 28, 1998 AND MARCH 29, 1997
(Dollars in thousands)
(Unaudited)
<CAPTION>
1998 1997
-------- --------
<S> <C> <C>
NET REVENUES ............................................................ $ 43,678 $ 45,274
-------- --------
COSTS AND EXPENSES:
Cost of sales ...................................................... 21,736 23,040
Administrative and general expenses ................................ 3,457 3,451
Provision for doubtful accounts .................................... 3,128 3,569
Marketing costs .................................................... 8,360 8,221
Coupon redemption costs ............................................ 1,065 952
Depreciation and amortization ...................................... 774 674
Other (income) expenses ............................................ (4) 91
-------- --------
OPERATING INCOME ....................................................... 5,162 5,276
Interest income .................................................... 37 19
Interest expense ................................................... 4,074 4,540
-------- --------
INCOME BEFORE PROVISION FOR INCOME TAXES ............................... 1,125 755
PROVISION FOR INCOME TAXES ............................................. 428 291
-------- --------
NET INCOME ............................................................. $ 697 $ 464
======== ========
<FN>
See notes to condensed consolidated financial statements.
</FN>
</TABLE>
4
<PAGE>
<TABLE>
HOSIERY CORPORATION OF AMERICA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTH PERIODS ENDED MARCH 28, 1998 AND MARCH 29, 1997
(Dollars in thousands)
(Unaudited)
<CAPTION>
1998 1997
-------- --------
OPERATING ACTIVITIES:
<S> <C> <C>
Net income ............................................................................................... $ 697 $ 464
Adjustments to reconcile net income to net cash used in
operating activities:
Depreciation and amortization ......................................................................... 774 674
Amortization of debt issue costs and discounts ........................................................ 412 468
Deferred income taxes ................................................................................. 323 152
Other ................................................................................................. 59 201
Amortization of deferred customer acquisition costs ................................................... 7,262 5,270
(Increase) decrease in operating assets:
Accounts receivable ............................................................................. (592) (3,191)
Inventories ..................................................................................... (489) (2,346)
Payments for deferred customer acquisition costs ................................................ (12,157) (10,908)
Prepaid and other current assets ................................................................ 214 (470)
Other assets .................................................................................... (97) (13)
Increase (decrease) in operating liabilities:
Accounts payable, accrued expenses and other liabilities ........................................ 1,208 3,070
Accrued coupon redemption costs ................................................................. 16 (101)
-------- --------
Net cash used in operating activities ..................................................... (2,370) (6,730)
-------- --------
INVESTING ACTIVITIES:
Acquisitions of property and equipment ................................................................... (280) (76)
Proceeds from sale of property and equipment ............................................................. 8 --
-------- --------
Net cash used in investing activities ..................................................... (272) (76)
-------- --------
FINANCING ACTIVITIES:
Net borrowings on note payable to bank ................................................................... -- 5,325
Payments on bank and other financing ..................................................................... (1,279) (29)
Payments on capital leases ............................................................................... (406) (450)
-------- --------
Net cash (used in) provided by financing activities ....................................... (1,685) 4,846
-------- --------
NET DECREASE IN CASH AND CASH EQUIVALENTS ................................................................... (4,327) (1,960)
Cash and cash equivalents at beginning of year ........................................................... 4,327 1,960
-------- --------
Cash and cash equivalents at end of period ............................................................... $ -- $ --
======== ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest .............................................................................................. $ 6,058 $ 6,135
======== ========
Income taxes .......................................................................................... $ 105 $ --
======== ========
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
Capital lease obligations of $0 and $799 were entered into for new equipment during the three month periods
ended 1998 and 1997 respectively.
<FN>
See notes to condensed consolidated financial statements.
</FN>
</TABLE>
5
<PAGE>
HOSIERY CORPORATION OF AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share data)
(Unaudited)
NOTE 1. Condensed Consolidated Financial Statements
In the opinion of management, the accompanying condensed consolidated financial
statements of Hosiery Corporation of America, Inc. and subsidiaries, which are
unaudited except for the Consolidated Balance Sheet as of December 31, 1997,
which is derived from audited financial statements, include all normal and
recurring adjustments necessary to present fairly the Company's financial
position as of March 28, 1998 and the results of operations and cash flows for
the three month periods ended March 28, 1998 and March 29, 1997.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted. These condensed 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 as filed with the Securities and Exchange Commission on March 30, 1998.
NOTE 2. Inventories
March 28, December 31,
1998 1997
--------- ------------
Raw materials............................ $890 $546
Work-in-process.......................... 2,893 2,748
Finished goods........................... 9,123 9,820
Promotional and packing material......... 2,741 2,044
------- -------
$15,647 $15,158
======= =======
NOTE 3. Commitments and Contingencies
The Company has continuing obligations with certain members of management
pursuant to previously signed employment agreements.
The Company has agreed to pay Kelso an annual fee of $263 each year for
financial advisory services and to reimburse Kelso for out-of-pocket expenses
incurred. Non-officer directors of the Company, other than those directors who
are affiliated with Kelso, will be paid an annual retainer of $20. In addition,
all out-of-pocket expenses of non-officer directors, including those directors
who are affiliated with Kelso, related to meetings attended, will be reimbursed
by the Company. Non-officer directors, including those directors affiliated with
Kelso, will receive no additional compensation for their services as directors
of the Company except as described above.
The Company is involved in, or has been involved in, litigation arising in the
normal course of its business. The Company can not predict the timing or outcome
of these claims and proceedings. Currently, except as discussed below, the
Company is not involved in any litigation which is expected to have a material
effect on the financial position of the business or the results of operations
and cash flows of the Company.
6
<PAGE>
NOTE 3. Commitments and Contingencies (continued)
The Company had received inquiries from the Federal Trade Commission ("FTC"),
sixteen state regulatory groups (the "States") and a trade association
concerning aspects of the Company's promotional materials, including whether the
terms of the Company's promotional offers are sufficiently disclosed in such
materials. Eleven of the States, acting as a multi-state group, sought to impose
certain disclosure requirements on the Company's promotional materials.
The Company has reached an agreement with the multistate group in which the
Company agreed to certain modifications and clarifications of its promotional
materials. The agreement became effective as of September 1, 1997. The Company's
promotional materials for all of 1997 already include the majority of the
modifications and, consequently, the Company feels these modifications and
clarifications will have no additional negative impact on the Company's response
rates beyond the actual first quarter results. However, there may be some
additional minor modifications which will need to be made to the Company's
promotional materials to fully satisfy the terms of the Company's agreement with
the multistate group, and no assurances can be given that such changes will not
have a further effect on the Company's response rate. In accordance with the
agreement, the Company paid $300,000 in administrative expenses and fees during
1997. The agreement also required that refunds be made to customers under
certain circumstances for a six-month period. These refunds were not material to
the Company's financial condition or results of operations.
The Company is hopeful that these modifications and clarifications will also
satisfy the inquiries from the FTC, the states not part of the multistate group
and the trade association; however, no assurances can be given in this regard.
The modifications the Company has already made to its solicitation materials has
had a material adverse effect on its domestic response rates. However, response
rates are only one of several factors that affect the Company's results of
operations. State regulators and trade associations from time to time contact
the Company with inquiries regarding the Company's promotional materials and
state regulators or trade associations could require or seek to impose
additional changes to the Company's promotional materials, and no assurance can
be given that such changes will not be significant or will not have a material
adverse effect on the Company's future financial condition or results of
operations.
NOTE 4. Note Payable to Bank
The Company has a revolving credit facility which provides for maximum
borrowings of $20,000. The Company can borrow based on a formula which comprises
the sum of 80% of accounts receivable and 50% of inventory. Interest is charged
at the bank's prime lending rate plus 0.5% or 1.5% over the Eurodollar rate. The
rate in effect at March 28, 1998 ranged from 7.13% to 7.38%.
At March 28, 1998, there were no borrowings outstanding against the credit line.
There were outstanding letters of credit of approximately $1,968, resulting in
$18,032 available to borrow.
7
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations for the Three Month Period Ended March 28, 1998
- --------------------------------------------------------------------------------
Results of Operations
- ---------------------
The following table sets forth certain income statement data for the Company
expressed as a percentage of net revenues:
Three Month Periods Ended
--------------------------
March 28, March 29,
1998 1997
--------- ---------
Net revenues 100.0% 100.0%
Cost of sales 49.8 50.9
Administrative and general expenses 7.9 7.6
Provision for doubtful accounts 7.2 7.9
Marketing costs 19.1 18.1
Coupon redemption costs 2.4 2.1
Depreciation and amortization 1.8 1.5
----- -----
Subtotal 88.2 88.1
----- -----
Income before interest-net, other (income)
expenses and provision for income taxes 11.8% 11.9%
===== =====
8
<PAGE>
Three Month Period Ended March 28, 1998 Compared to Three Month Period Ended
March 29, 1997
- --------------------------------------------------------------------------------
Net revenues declined from $45.3 million in 1997 to $43.7 million in 1998, a
decrease of 3.5%. The decrease was caused by lower response rates in the United
States. Additionally, the first quarter of 1997 realized a benefit from a later
than normal mailing in 1996. These decreases were offset by higher revenue in
Europe, $4.9 million in 1998 as compared to $4.1 million in 1997.
Cost of sales decreased from $23.0 million in 1997 to $21.7 million in 1998, a
decrease of $1.3 million or 5.7%. The favorable variance in cost of sales is the
result of less shipments of the least profitable customers in the United States
and substantially better margins in the United Kingdom and Germany since these
countries now have an existing customer base from continuing hose shipments. As
a percentage of net revenues, cost of sales was 49.8% in the first quarter of
1998 versus 50.9% in the first quarter of 1997.
Provision for doubtful accounts decreased from $3.6 million in 1997 to $3.1
million in 1998, a decrease of 12.4%. This decrease is the result of less Turn
1, 2 and 3 shipments to customers which have the highest incidence of bad debts.
As a percentage of net revenue, provision for doubtful accounts was 7.2% in the
first quarter of 1998 versus 7.9% for the same period in 1997.
Marketing costs increased slightly from $8.2 million in 1997 to $8.4 million in
1998. The increase was the result of quicker amortization of the prior year's
cost in all countries offset by lower spending in Europe. As a percentage of net
revenue, marketing costs were 19.1% in 1998 versus 18.1% in 1997.
Interest expense has decreased from $4.5 million in 1997 to $4.1 million in 1998
related to lower interest rates under the revised credit agreement and less
borrowings outstanding.
Income before taxes has increased from $0.8 million in 1997 to $1.1 million in
1998. As a percentage of net revenues, pretax income increased from 1.7% in 1997
to 2.6% in 1998. The increase in pretax profits is primarily caused by lower
cost of sales, interest expense and provision for doubtful accounts offset by
lower revenue and higher marketing, coupon redemption and depreciation expenses.
Net income increased from $0.5 million in 1997 to $0.7 million in 1998. As a
percentage of net revenues, net income was 1.6% in 1998 compared to 1.0% in
1997. The increase in pretax income of $0.4 million offset by an increased
provision for taxes of $0.1 million account for the increase.
9
<PAGE>
Liquidity and Capital Resources
- -------------------------------
The Company's cash requirements arise principally from the need to finance new
customer acquisitions, capital expenditures, debt repayment and other working
capital requirements. The Company expects to finance these cash requirements
from internally generated funds and/or its Revolving Credit Facility.
The decrease in working capital of $4.0 million is caused by two mailings in the
first quarter which increased accounts payable and bank overdrafts and the
payment of interest and principal which reduces cash.
Capital expenditures were $0.3 million and $0.9 million for the three month
periods ended March 28, 1998 and March 29, 1997, respectively. A portion of the
expenditures in 1997 were financed through the assumption of capital leases.
Net cash used in operating activities was $2.4 million for the first quarter of
1998 as compared to $6.7 million in the first quarter of 1997. This change is
primarily due to lower increases in receivables and inventory, increase in
amortization of marketing costs, offset by increases in the payments of
marketing costs and lower increase in accounts payable.
Net cash used in investing activities to acquire property and equipment was $0.3
million and $0.1 million for the three month periods ended March 28, 1998 and
March 29, 1997, respectively.
Net cash (used in) provided by financing activities was $(1.7) million and $4.8
million for the three month periods ended March 28, 1998 and March 29, 1997,
respectively. In 1998, the Company had no net borrowings on its Revolving Credit
Facility, while in 1997 it had net borrowings of $5.3 million. In 1998, the
Company made payments on bank and other financing totaling $1.3 million.
The Recapitalization
As a result of the substantial indebtedness incurred in connection with a
Recapitalization, in October 1994, the Company has significant debt service
obligations. At March 28, 1998, the outstanding amount of the Company's
indebtedness (other than trade payables) is $136.9 million, including $64.1
million of senior secured debt and $68.6 million of senior subordinated debt
(represented by the Notes). Since consummation of the Recapitalization, the
Company's ongoing cash requirements through the end of fiscal 1999 will consist
primarily of interest payments and required amortization payments under the
Credit Agreement, interest payments on the Notes, payments of capital lease
obligations, front end marketing expenditures, working capital, capital
expenditures and taxes. The required amortization payments under the Credit
Agreement will be: $3.0 million in 1998, $7.5 million in 1999, $13.0 million in
2000, $20.0 million in 2001 and $19.5 million in 2002. Other than upon a change
of control (as defined) or as a result of certain asset sales, the Company will
not be required to make any principal payments in respect of the Notes until
maturity, August 2002.
The Company's primary source of liquidity will be cash flow from operations and
funds available to it under a revolving credit facility. The revolving credit
facility provides for maximum borrowings of $20.0 million, $18.0 million of
which was available at March 28, 1998.
10
<PAGE>
Legal Proceedings
As discussed further in Part II, Item 1--Legal Proceedings, the Company had
received inquiries from the Federal Trade Commission ("FTC"), sixteen state
regulatory groups (the "States") and a trade association concerning aspects of
the Company's promotional materials, including whether the terms of the
Company's promotional offers are sufficiently disclosed in such materials.
Eleven of the States, acting as a multi-state group, sought to impose certain
disclosure requirements on the Company's promotional materials.
The Company has reached an agreement with the multistate group in which the
Company agreed to certain modifications and clarifications of its promotional
materials. The agreement became effective as of September 1, 1997. The Company's
promotional materials for all of 1997 already include the majority of the
modifications and, consequently, the Company feels these modifications and
clarifications will have no additional negative impact on the Company's response
rates beyond the actual first quarter results. However, there may be some
additional minor modifications which will need to be made to the Company's
promotional materials to fully satisfy the terms of the Company's agreement with
the multistate group, and no assurances can be given that such changes will not
have a further effect on the Company's response rate. In accordance with the
agreement, the Company paid $300,000 in administrative expenses and fees during
1997. The agreement also required that refunds be made to customers under
certain circumstances for a six-month period. These refunds were not material to
the Company's financial condition or results of operations.
The Company is hopeful that these modifications and clarifications will also
satisfy the inquiries from the FTC and the states not part of the multistate
group and the trade association; however, no assurances can be given in this
regard. The modifications the Company has already made to its solicitation
materials has had a material adverse effect on its domestic response rates.
However, response rates are only one of several factors that affect the
Company's results of operations. State regulators and trade associations from
time to time contact the Company with inquiries regarding the Company's
promotional materials and state regulators or trade associations could require
or seek to impose additional changes to the Company's promotional materials, and
no assurance can be given that such changes will not be significant or will not
have a material adverse effect on the Company's future financial condition or
results of operations.
Inflation
Over the past three years, which has been a period of low inflation, the Company
has been able to increase sales volume to compensate for increases in operating
expenses. The Company has historically been able to increase its selling prices
as the cost of sales and related operating expenses have increased and,
therefore, inflation has not had a significant effect on operations.
11
<PAGE>
PART II - OTHER INFORMATION
- ---------------------------
Item 1. Legal Proceedings
The Company is involved in, or has been involved in, litigation arising in the
normal course of its business. The Company can not predict the timing or outcome
of these claims and proceedings. Currently, except as discussed below, the
Company is not involved in any litigation which is expected to have a material
effect on the financial position of the business or the results of operations
and cash flows of the Company.
In 1984, as a result of a lawsuit brought by the Federal Trade Commission
("FTC"), the Federal District Court for the Eastern District of Pennsylvania
issued a consent injunction, which sets forth specific rules with which the
Company must comply in conducting its mail order business and permanently
enjoins the Company, its successors and assigns, its officers, agents,
representatives and employees, and anyone acting in concert with the Company
from violating various FTC and Postal Service laws and regulations. The FTC had
previously made inquiries about some aspects of the Company's promotional
materials prompting the Company to adopt revised promotional materials which,
the Company believes but cannot assure, will meet the concerns expressed by the
FTC.
The Company had received inquiries from the FTC, sixteen state regulatory groups
(the "States") and a trade association concerning aspects of the Company's
promotional materials, including whether the terms of the Company's promotional
offers are sufficiently disclosed in such materials. Eleven of the States,
acting as a multi-state group, sought to impose certain disclosure requirements
on the Company's promotional materials.
The Company has reached an agreement with the multistate group in which the
Company agreed to certain modifications and clarifications of its promotional
materials. The agreement became effective as of September 1, 1997. The Company's
promotional materials for all of 1997 already include the majority of the
modifications and, consequently, the Company feels these modifications and
clarifications will have no additional negative impact on the Company's response
rates beyond the actual first quarter results. However, there may be some
additional minor modifications which will need to be made to the Company's
promotional materials to fully satisfy the terms of the Company's agreement with
the multistate group, and no assurances can be given that such changes will not
have a further effect on the Company's response rate. In accordance with the
agreement, the Company paid $300,000 in administrative expenses and fees during
1997. The agreement also requires that refunds be made to customers under
certain circumstances for a six-month period. These refunds were not material
to the Company's financial condition or results of operations.
The Company is hopeful that these modifications and clarifications will also
satisfy the inquiries from the FTC and the states not part of the multistate
group and the trade association; however, no assurances can be given in this
regard. The modifications the Company has already made to its solicitation
materials has had a material adverse effect on its domestic response rates.
However, response rates are only one of several factors that affect the
Company's results of operations. State regulators and trade associations from
time to time contact the Company with inquiries regarding the Company's
promotional materials and state regulators or trade associations could require
or seek to impose additional changes to the Company's promotional materials, and
no assurance can be given that such changes will not be significant or will not
have a material adverse effect on the Company's future financial condition or
results of operations.
Item 2. Change in Securities
None.
12
<PAGE>
Item 3. Defaults upon Senior Securities
None.
Item 4. Submission of Matters to a vote of Security Holders
None.
Item 5. Other Information
None.
Item 6. Reports on Form 8K.
No reports on Form 8K have been filed during the quarter for which this
report is filed.
13
<PAGE>
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.
HOSIERY CORPORATION OF AMERICA, INC.
------------------------------------
(Registrant)
Date: May 7, 1998 /s/ ARTHUR C. HUGHES
------------------ --------------------------------
Arthur C. Hughes
Vice President &
Chief Financial Officer
14
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000934383
<NAME> Hosiery Corporation of America, Inc.
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> Year
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-28-1998
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 26,591
<ALLOWANCES> 1,819
<INVENTORY> 15,647
<CURRENT-ASSETS> 42,603
<PP&E> 33,688
<DEPRECIATION> 16,852
<TOTAL-ASSETS> 101,280
<CURRENT-LIABILITIES> 34,181
<BONDS> 69,453
493
37,398
<COMMON> 14
<OTHER-SE> (108,764)
<TOTAL-LIABILITY-AND-EQUITY> 101,280
<SALES> 43,678
<TOTAL-REVENUES> 43,678
<CGS> 13,134
<TOTAL-COSTS> 21,736
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 3,128
<INTEREST-EXPENSE> 4,074
<INCOME-PRETAX> 1,125
<INCOME-TAX> 428
<INCOME-CONTINUING> 697
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 697
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
