<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, 2001.
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 3, 2001, there were 6,387,295 shares of the Registrant's Common
Stock outstanding.
<Page>
HAGGAR CORP. AND SUBSIDIARIES
INDEX
<Table>
Part I. Financial Information
Item 1. Consolidated Financial Statements
Consolidated Statements of Operations
(Three and nine months ended June 30, 2001 and 2000) 3
Consolidated Balance Sheets
(As of June 30, 2001 and September 30, 2000) 4
Consolidated Statements of Cash Flows
(Nine months ended June 30, 2001 and 2000) 5
Notes to Consolidated Financial Statements 6-9
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 10-14
Item 3. Quantitative and Qualitative Disclosures about Market Risk 14
Part II. Other Information.
Item 6. Exhibits and Reports on Form 8-K 15
Signature 15
</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,
-------------------------- --------------------------
2001 2000 2001 2000
----------- ----------- ----------- -----------
Net sales $ 108,151 $ 102,053 $ 323,798 $ 317,803
Cost of goods sold 76,475 69,253 223,672 213,159
Reorganization Costs - - 20,800 -
----------- ----------- ----------- -----------
Gross profit 31,676 32,800 79,326 104,644
Selling, general and administrative expenses (28,927) (30,541) (92,678) (97,141)
Royalty income, net 435 592 1,476 1,501
----------- ----------- ----------- -----------
Operating income (loss) 3,184 2,851 (11,876) 9,004
Other income, net 149 451 202 808
Interest expense (1,400) (1,037) (3,797) (2,968)
------------ ------------ ------------ -----------
Income (loss) from operations before provision
(benefit) for income taxes 1,933 2,265 (15,471) 6,844
Provision (benefit) for income taxes 905 842 (4,069) 2,682
----------- ----------- ----------- -----------
Net income (loss) $ 1,028 $ 1,423 ($ 11,402) $ 4,162
=========== =========== =========== ===========
Net income (loss) per share on a basic basis $ 0.16 $ 0.22 ($ 1.75) $ 0.61
=========== =========== =========== ===========
Net income (loss) per share on a diluted basis $ 0.15 $ 0.21 ($ 1.75) $ 0.59
=========== =========== =========== ===========
Weighted average number of common shares
outstanding - Basic 6,504 6,594 6,512 6,795
=========== =========== =========== ===========
Weighted average number of common shares and
common share-equivalents outstanding - Diluted 6,798 6,847 6,512 7,001
=========== =========== =========== ===========
The accompanying notes are an integral part of these consolidated financial statements.
</Table>
3
<Page>
HAGGAR CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<Table>
<Caption>
June 30,
2001 September 30,
(unaudited) 2000
--------------- ----------------
ASSETS
Current assets:
Cash and cash equivalents $ 11,107 $ 6,238
Accounts receivable, net 55,472 66,362
Due from factor 2,511 1,951
Inventories 103,910 92,581
Deferred tax benefit 13,618 10,624
Other current assets 2,202 1,737
----------- -----------
Total current assets 188,820 179,493
Property, plant, and equipment, net 52,396 59,563
Goodwill, net 25,429 26,505
Other assets 9,008 6,795
----------- -----------
Total assets $ 275,653 $ 272,356
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 27,460 $ 25,176
Accrued liabilities 23,131 22,970
Accrued wages and other employee benefits 2,840 6,106
Accrued workers' compensation 4,071 3,941
Current portion of long-term debt 3,765 4,046
----------- -----------
Total current liabilities 61,267 62,239
Long-term debt 63,599 46,333
----------- -----------
Total liabilities 124,866 108,572
Commitments and contingencies
Stockholders' equity:
Common stock - par value $0.10 per share; 25,000,000
shares authorized and 8,591,000 and 8,582,998
shares issued at June 30, 2001 and September 30,
2000, respectively 859 858
Additional paid-in capital 42,014 41,931
Cumulative translation adjustment (539) (565)
Retained earnings 131,891 144,287
----------- -----------
174,225 186,511
Less - Treasury stock, 2,098,205 and 2,043,205 shares at cost at
June 30, 2001 and September 30, 2000, respectively (23,438) (22,727)
----------- ----------
Total stockholders' equity 150,787 163,784
----------- -----------
Total liabilities and stockholders' equity $ 275,653 $ 272,356
=========== ===========
The accompanying notes are an integral part of these consolidated financial statements.
</Table>
4
<Page>
HAGGAR CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED, IN THOUSANDS)
<Table>
<Caption>
Nine Months Ended
June 30,
----------------------------
2001 2000
----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) ($ 11,402) $ 4,162
Adjustments to reconcile net income (loss) to net cash (used in)
provided by operating activities:
Depreciation and amortization 9,707 10,043
(Gain) loss on disposal of property, plant, and equipment 2,488 (393)
Changes in assets and liabilities:
Accounts receivable, net 10,890 13,187
Due from factor (560) 1,940
Inventories (11,329) 2,221
Current deferred tax benefit (2,994) 403
Other current assets (465) (2,806)
Accounts payable 2,284 (9,585)
Accrued liabilities 161 (10,732)
Accrued wages, workers' compensation, and other employee benefits (3,136) (3,826)
------------- ------------
Net cash (used in) provided by operating activities (4,356) 4,614
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property, plant and equipment, net (3,881) (7,417)
Proceeds from the sale of property, plant and equipment, net 33 1,280
(Increase) decrease in other assets (2,317) 1,331
----------- -----------
Net cash used in investing activities (6,165) (4,806)
CASH FLOWS FROM FINANCING ACTIVITIES
Purchase of treasury stock at cost (711) (7,747)
Proceeds from issuance of long-term debt 96,000 118,000
Payments on long-term debt (79,015) (104,825)
Proceeds from issuance of common stock 84 18
Payments of cash dividends (994) (1,003)
----------- ------------
Net cash provided by financing activities 15,364 4,443
Effects of exchange rates on cash and cash equivalents 26 -
Increase in cash and cash equivalents 4,869 4,251
Cash and cash equivalents, beginning of period 6,238 6,380
----------- -----------
Cash and cash equivalents, end of period $ 11,107 $ 10,631
=========== ===========
Supplemental disclosure of cash flow information
Cash paid for:
Interest $ 4,679 $ 2,944
Income taxes $ 4,377 $ 6,915
The accompanying notes are an integral part of these consolidated financial statements.
</Table>
5
<Page>
HAGGAR CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED FINANCIAL STATEMENTS
The consolidated balance sheet as of June 30, 2001, and the consolidated
statements of operations and cash flows for the three and nine months ended
June 30, 2001, 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, 2001, and for all other periods presented, have been made. Certain
information and footnote disclosures normally included in the consolidated
financial statements prepared in accordance with generally accepted
accounting principles have been omitted. These consolidated financial
statements should be read in conjunction with the consolidated financial
statements and accompanying footnotes in the Company's Annual Report on Form
10-K for the year ended September 30, 2000.
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 23.3% and 24.6% of the Company's net sales for the
nine months ended June 30, 2001 and 2000, respectively. The Company's second
largest current customer, Kohl's Department Stores, Inc., accounted for 12.6%
and 11.8% of the Company's net sales for the nine months ended June 30, 2001
and 2000, respectively. The Company's third largest current customer, Wal-Mart,
accounted for 11.6% and 8.3% of the Company's net sales for the nine months
ended June 30, 2001 and 2000, 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.
NEW ACCOUNTING STANDARDS
In June 2001, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 141, "Business Combinations" and
SFAS No. 142, "Goodwill and Other Intangible Assets." SFAS No. 141 requires
the use of the purchase method of accounting for all business combinations
initiated after June 30, 2001, thereby eliminating the pooling-of-interests
method of accounting. SFAS No. 141 also addresses the recognition and
measurement of goodwill and other intangible assets acquired in a business
combination. The adoption of SFAS No. 141 by the Company on July 1, 2001,
will not have a significant affect on the Company's consolidated financial
statements.
Upon the adoption of SFAS No. 142, goodwill and intangible assets that have
indefinite useful lives will not be amortized but rather will be tested at
least annually for impairment. The Company will adopt the provisions of SFAS
No. 142 on October 1, 2001. Goodwill amortization will be approximately $1.5
million for fiscal 2001, none of which is deductible for tax purposes. The
Company will complete its assessment of goodwill impairment by March 31, 2002.
The impact of an impairment, if any, would be recorded as a cumulative effect
of a change in accounting principle during the first quarter of fiscal 2002.
6
<Page>
INVENTORIES
Inventories are stated at the lower of cost (first-in, first-out) or market and
consisted of the following at June 30, 2001, and September 30, 2000 (in
thousands):
<Table>
<Caption>
June 30, September 30,
2001 2000
---------------- ---------------
Piece goods $ 13,533 $ 12,675
Trimmings & supplies 4,199 3,017
Work-in-process 13,860 17,955
Finished garments 72,318 58,934
---------------- ---------------
$ 103,910 $ 92,581
================ ===============
</Table>
Work-in-process and finished garments inventories consisted of materials, labor
and manufacturing overhead.
LONG-TERM DEBT
Long-term debt consisted of the following at June 30, 2001, and September 30,
2000 (in thousands):
<Table>
<Caption>
June 30, September 30,
2001 2000
------------- -------------
Borrowings under revolving
credit line $ 50,000 $ 29,000
Industrial Development Revenue
Bonds with interest at a rate equal
to that of high-quality, short-term,
tax-exempt obligations, as defined
(2.8% at June 30, 2001 and 3.65%
at September 30, 2000), payable in
annual installments of $100
to $200, and a final payment of
$2,000 in 2005, secured by
certain buildings and equipment 2,400 2,500
Allstate Notes 14,286 17,857
Other 678 1,022
------------- -------------
67,364 50,379
Less - Current portion 3,765 4,046
------------- -------------
$ 63,599 $ 46,333
============= =============
</Table>
Net assets mortgaged or subject to lien under the Industrial Development
Revenue Bonds totaled approximately $700,330 at June 30, 2001.
As of June 30, 2001, the Company had a revolving credit line agreement (the
"Agreement") with certain banks. As of June 30, 2001, the Company had
additional available borrowing capacity of approximately $31.4 million. The
Company incurred approximately $23,000 in commitment fees during the quarter
ended June 30, 2001. The interest rates for the nine month period ended June
30, 2001, ranged from 6.75% to 9.5%. The Agreement prohibits the Company from
pledging its accounts receivable and inventories, contains limitations on
incurring additional indebtedness, requires maintaining minimum net worth
levels of the Company and the Company's main operating subsidiary, and also
requires the maintenance of certain financial ratios.
7
<Page>
On May 11, 2001, the Company amended the Agreement to extend the maturity date
one year to June 30, 2003, with a one year renewal at the option of the banks,
and to revise certain covenants. The amendment also reduces the Agreement to a
$90.0 million facility, which may be increased up to a maximum of a $100.0
million facility by the addition of new banks to the lending group.
REORGANIZATION
On March 26, 2001, the Company announced plans to close its manufacturing
facility in Edinburg, Texas, and its operations in Japan. Accordingly, the
Company recorded a $20.8 million charge to operations ($14.3 million after
taxes) in the quarter ending March 31, 2001. The Company's decision to close
its Edinburg facility was made in conjunction with the Company's continuing
strategy to source its production internationally. All 595 employees at the
Edinburg plant have been terminated in conjunction with the closure, which
occurred on May 10, 2001. Severance payments of $2.2 million have been made as
of June 30, 2001, and all other employee termination costs are expected to be
paid by the end of fiscal 2002. In conjunction with the Edinburg closure, the
net book value of the manufacturing facility and equipment was written off as
the net realizable value of such assets was expected to be insignificant.
Due to unfavorable retail conditions in Japan, the Company decided to terminate
its operations in Japan, which is expected to be completed by the end of the
fourth quarter of fiscal 2001. Severance costs related to the closure are
expected to be insignificant and reserves necessary to write down the
operation's receivables and inventory were approximately $1.0 million.
During the second quarter of fiscal 2001, the Company recorded an $8.6 million
charge for legal expenses, of which $1.6 million was due to a cash settlement
for certain claims and the remaining $7.0 million was due to management's
estimate of the expected loss for unsettled claims against the Company,
including two jury verdicts totaling $5.2 million which have been returned
against subsidiaries of the Company and are currently on appeal. The majority
of the legal claims against the Company relate to claims for wrongful discharge
and common law tort by former employees of the Company's sewing facilities in
South Texas that were closed in previous years. Due to the closure of the
Company's last manufacturing facility in South Texas, management believes that
the likelihood of adverse outcomes related to such claims has increased
significantly. Accordingly, the Company has recorded its best estimate of
future costs for such claims.
The reorganization costs before tax are summarized as follows (in millions):
<Table>
<Caption>
Balance Balance
March 31, 2001 Payments June 30, 2001
-------------- -------- -------------
Employee termination and related costs $8.1 ($3.6) $4.5
Plant and equipment impairment 3.1 ($2.5) 0.6
Other asset write-downs 1.0 ($1.0) -
Legal costs 8.6 ($2.2) 6.4
--- ------ ---
Total Reorganization Costs $ 20.8 ($9.3) $ 11.5
====== ====== ======
</Table>
8
<Page>
NET INCOME PER COMMON SHARE - BASIC AND DILUTED
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 821,084 common shares at prices ranging from $11.25 to
$23.00 were not dilutive due to the loss recorded by the Company for the nine
months ended June 30, 2001. Options to purchase 842,551 common shares at
prices ranging from $11.25 to $23.00 were not dilutive and were outstanding
for the three months ended June 30, 2001. Options to purchase 826,865 common
shares at prices ranging from $12.88 to $23.00 were not dilutive and were
outstanding for the three and nine months ended June 30, 2000. Such shares
for these 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 (in thousands, except per share data):
<Table>
<Caption>
Three Months Ended Nine Months Ended
June 30, June 30,
-------------------------- --------------------------
2001 2000 2001 2000
----------- ----------- ----------- -----------
Net income (loss) to common stockholders $ 1,028 $ 1,423 ($ 11,402) $ 4,162
Weighted average common shares outstanding 6,504 6,594 6,512 6,795
Shares equivalents, due to stock options 294 253 - 206
6,798 6,847 6,512 7,001
=========== =========== =========== ===========
Net income (loss) per share - diluted $ 0.15 $ 0.21 ($ 1.75) $ 0.59
=========== =========== ========== ===========
</Table>
SUBSEQUENT EVENTS
DIVIDEND DECLARED.
The Company declared a cash dividend of $0.05 per share payable to the
stockholders of record on August 6, 2001. The dividend of approximately
$324,500 will be paid on or before August 20, 2001.
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, 2000.
RESULTS OF OPERATIONS
REORGANIZATION
On March 26, 2001, the Company announced plans to close its manufacturing
facility in Edinburg, Texas, and its operations in Japan. Accordingly, the
Company recorded a $20.8 million charge to operations ($14.3 million after
taxes) in the quarter ending March 31, 2001. The Company's decision to close
its Edinburg facility was made in conjunction with the Company's continuing
strategy to source its production internationally. All 595 employees at the
Edinburg plant have been terminated in conjunction with the closure, which
occurred on May 10, 2001. Severance payments of $2.2 million have been made as
of June 30, 2001, and all other employee termination costs are expected to be
paid by the end of fiscal 2002. In conjunction with the Edinburg closure, the
net book value of the manufacturing facility and equipment was written off as
the net realizable value of such assets was expected to be insignificant.
Due to unfavorable retail conditions in Japan, the Company decided to terminate
its operations in Japan, which is expected to be completed by the end of the
fourth quarter of fiscal 2001. Severance costs related to the closure are
expected to be insignificant and reserves necessary to write down the
operation's receivables and inventory were approximately $1.0 million.
During the second quarter of fiscal 2001, the Company recorded an $8.6 million
charge for legal expenses, of which $1.6 million was due to a cash settlement
for certain claims and the remaining $7.0 million was due to management's
estimate of the expected loss for unsettled claims against the Company,
including two jury verdicts totaling $5.2 million which have been returned
against subsidiaries of the Company and are currently on appeal. The majority
of the legal claims against the Company relate to claims for wrongful discharge
and common law tort by former employees of the Company's sewing facilities in
South Texas that were closed in previous years. Due to the closure of the
Company's last manufacturing facility in South Texas, management believes that
the likelihood of adverse outcomes related to such claims has increased
significantly. Accordingly, the Company has recorded its best estimate of
future costs for such claims.
The reorganization costs before tax are summarized as follows (in millions):
<Table>
<Caption>
Employee termination and related costs $ 8.1
Plant and equipment impairment 3.1
Other asset write-downs 1.0
Legal costs 8.6
-----
Total Reorganization Costs $20.8
=====
</Table>
The reorganization is expected to provide an annual pre-tax cost savings of $3
to $5 million depending on the mix of our products and future sourcing efforts.
10
<Page>
OPERATIONS
The Company's third quarter of fiscal 2001 net income of $1.0 million compares
to net income of $1.4 million in the third quarter of fiscal 2000. The decrease
in net income for the third quarter relates primarily to decreased margins due
to the overall competitive retail environment which has resulted in lower
wholesale prices. In the third quarter of fiscal 2000, the Company had
unusually high legal expenses incurred as a result of various claims by former
employees for wrongful discharge and common law tort against the Company. The
net loss to common stockholders for the nine months ended June 30, 2001, was
$11.4 million compared to $4.2 million net income for the nine months ended
June 30, 2000. The decrease in net income for the nine months ended June 30,
2001, relates principally to the reorganization of the Company's manufacturing
operations.
Net sales for the quarter ended June 30, 2001, increased 6.0% to $108.2 million
from $102.1 million in the third quarter of fiscal 2000. The increase in net
sales for the third quarter of fiscal 2001 is the combined result of a 20.6%
increase in unit sales and a 14.6% decrease in the sales price due to increased
private label sales and more competitive retail pricing. Net sales for the nine
months ended June 30, 2001, increased 1.9% to $323.8 million compared to $317.8
million in the prior fiscal year. The increase in the first nine months of
fiscal 2001 resulted from a 8.4% increase in unit sales and a 6.5% decrease in
the sales price due to more competitive wholesale pricing.
Gross profit as a percentage of net sales decreased to 29.3% in the third
quarter of fiscal 2001 compared to 32.2% for the same quarter last year. Before
the reorganization charge, the gross profit for the first nine months of fiscal
2001 decreased to 30.9% from 33.0% in the first nine months of fiscal 2000.
Excluding the legal charge to cost of sales for fiscal 2000, the gross profit
as a percentage of net sales was 33.7% and 33.5% for the third quarter and nine
months ended June 30, 2000, respectively. The decreases in gross profit are
primarily the result of decreased margins due to the overall competitive retail
environment which resulted in lower wholesale prices.
Selling, general and administrative expenses as a percentage of net sales
decreased to 26.7% for the three month period ended June 30, 2001, as compared
to 29.9% for the same period ended June 30, 2000. Actual selling, general and
administrative expenses decreased to $28.9 million in the third quarter of
fiscal 2001 compared to $30.5 million in the same quarter in fiscal 2000. The
$1.6 million decrease in selling, general and administrative expenses for the
third quarter of fiscal 2001 compared to the third quarter of fiscal 2000
related to a $1.0 million decrease in legal expenses, a $0.3 million decrease
in selling and advertising expenses, a $0.5 million decrease in Haggar Japan's
expenses, a $0.4 million decrease in other general expenses (including
insurance and incentive programs) and a $0.3 million decrease in the women's
division expenses, as offset by a $0.9 million increase in shipping expenses
due to increased unit sales.
Selling, general and administrative expenses as a percentage of net sales
decreased to 28.6% for the nine month period ended June 30, 2001, as compared
to 30.6% for the same period ended June 30, 2000. Actual selling, general and
administrative expenses decreased to $92.7 million for the nine months ended
June 30, 2001, compared to $97.1 million in the first nine months of the prior
fiscal year. The decrease of $4.4 million in selling, general and
administrative expenses for the first nine months of fiscal 2001 compared to
fiscal 2000 primarily related to a $1.9 million decrease in selling and
advertising expenses, a $1.9 million decrease of legal expenses, a $0.3 million
decrease in licensing expenses, a $0.6 million decrease in Haggar Japan's
expenses, a $0.3 million decrease in expenses of retail operations, and a $0.7
million decrease in women's division expenses, as offset by a $1.3 million
increase in shipping expenses due to increased unit sales.
Other income was $149,000 in the third quarter of fiscal 2001 compared to
$451,000 in the same quarter last year. For the first nine months of fiscal
2001, other income decreased to $202,000 compared to $808,000 for the same
period last year. The decreases in the three and nine months of fiscal 2001
relate to gains from the sales of miscellaneous equipment in fiscal 2000 which
did not repeat in fiscal 2001.
11
<Page>
In the third quarter of fiscal 2001, the provision for income taxes increased
as a percentage of income before taxes to 46.8% from 37.2% for the same quarter
last year. For the nine months ended June 30, 2001, the benefit from income
taxes as a percentage of income before taxes was 26.3% as compared to a 39.2%
provision for income taxes for the same period last year. The effective tax
rates differ from the federal statutory rate primarily due to foreign and state
taxes and non-deductible goodwill.
LIQUIDITY AND CAPITAL RESOURCES
The Company's trade accounts receivable potentially expose the Company to
concentrations of credit risk 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 the factor, decreased
approximately $10.3 million to $58.0 million at June 30, 2001, from $68.3
million at September 30, 2000. This decrease is primarily the result of
the seasonality of the Company's sales.
Inventories as of June 30, 2001, increased to $103.9 million from $92.6 million
at September 30, 2000. The increase in inventory levels relates primarily to
increased finished goods inventories in anticipation for seasonal sales in the
fourth quarter of fiscal 2001.
The Company has a revolving credit line facility with certain banks. As of June
30, 2001, the Company had additional available borrowing capacity of
approximately $31.4 million. The Company incurred approximately $23,000 in
commitment fees related to the available borrowing capacity for the three
months ended June 30, 2001. The interest rates for the quarter ended June 30,
2001, ranged from 6.75% to 9.5%. The facility will mature June 30, 2003, with a
one year renewal at the option of the banks.
For the nine months ended June 30, 2001, the Company used cash in operating
activities of approximately $4.4 million. The cash used is primarily the
result of an $11.3 million increase in inventories and a $3.1 million
increase in accrued wages, workers compensation, and other employee benefits,
offset by a $10.3 million decrease in accounts receivable and due from factor
and a $2.3 million increase in accounts payable. For the same period last
year, the Company provided cash from operating activities of approximately
$4.6 million. The cash provided was primarily the result of a $15.1 million
decrease in accounts receivable and due from factor and a $2.2 million
decrease in inventories, offset by a $10.7 million decrease in accrued
liabilities.
The Company used approximately $6.2 million in investing activities for the
nine months ended June 30, 2001. The Company purchased property, plant and
equipment of $3.9 million, and had a $2.3 million increase in other assets. For
the nine months ended June 30, 2000, the Company used approximately $4.8
million in investing activities. The Company purchased $7.4 million of
property, plant and equipment offset by proceeds from the sale of property,
plant and equipment of $1.3 million and a $1.3 million decrease in other assets.
Cash flows provided from financing activities of $15.4 million for the nine
months ended June 30, 2001, were primarily the result of a net increase in
long-term debt of $17.0 million, offset by a $1.0 million payment of cash
dividends and the purchase of $0.7 million in treasury stock. Comparatively,
cash flows provided by financing activities of $4.4 million for the same period
last year were primarily the result of a net increase in long-term debt of
$13.2 million, offset by a $1.0 million payment of cash dividends and the
purchase of $7.7 million in treasury stock.
The Company believes that the cash flow generated from operations and the funds
available under the aforementioned credit facilities will be adequate to meet
its working capital and related financing needs for the foreseeable future.
NEW ACCOUNTING STANDARDS
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In June 2001, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 141, "Business Combinations" and
SFAS No. 142, "Goodwill and Other Intangible Assets." SFAS No. 141 requires
the use of the purchase method of accounting for all business combinations
initiated after June 30, 2001, thereby eliminating the pooling-of-interests
method of accounting. SFAS No. 141 also addresses the recognition and
measurement of goodwill and other intangible assets acquired in a business
combination. The adoption of SFAS No. 141 by the Company on July 1, 2001,
will not have a significant affect on the Company's consolidated financial
statements.
Upon the adoption of SFAS No. 142, goodwill and intangible assets that have
indefinite useful lives will not be amortized but rather will be tested at
least annually for impairment. The Company will adopt the provisions of SFAS
No. 142 on October 1, 2001. Goodwill amortization will be approximately $1.5
million for fiscal 2001, none of which is deductible for tax purposes. The
Company will complete its assessment of goodwill impairment by March 31, 2002.
The impact of an impairment, if any, would be recorded as a cumulative effect
of a change in accounting principle during the first quarter of fiscal 2002.
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.
Although the Company believes that any forward-looking statements are based on
reasonable assumptions, it can give no assurance that its expectations will in
fact occur and cautions that actual results may differ materially from those in
any forward-looking statements. A number of factors could affect the results of
the Company or the apparel industry generally and could cause the Company's
expected results to differ materially from those expressed in this filing.
These factors include, among other things:
- Changes in general business conditions,
- Impact of competition in the apparel industry,
- Changes in the performance of the retail sector in general and the
apparel industry in particular,
- Seasonality of the Company's business,
- Changes in consumer acceptance of new products and the success of
advertising, marketing and promotional campaigns,
- Changes in laws and other regulatory actions,
- Changes in labor relations,
- Political and economic events and conditions domestically or in the
foreign jurisdictions in which the Company operates,
- Unexpected judicial decisions,
- Changes in interest rates and capital market conditions and inflation,
- Acquisition or dissolution of business enterprises,
- Natural disasters, and
- Unusual or infrequent items that cannot be foreseen or are not
susceptible to estimation.
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SUBSEQUENT EVENTS
DIVIDEND DECLARED.
The Company declared a cash dividend of $0.05 per share payable to the
stockholders of record on August 6, 2001. The dividend of approximately
$324,500 will be paid on or before August 20, 2001.
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 through its borrowing activities. As
of June 30, 2001, the Company had $50.0 million outstanding under its revolving
credit line agreement and $14.3 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.
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PART II. OTHER INFORMATION.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibit 10(a) Eighth Amendment to First Amended and Restated
Credit Agreement dated May 11, 2001, between the
Company and Chase Manhattan Bank, as agent for
a bank syndicate.
(b) Form 8-K's were filed on May 2, 2001, June 15, 2001, and July 25,
2001, disclosing the Company's updated projections under Item 9.
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 3, 2001 By: /s/ David M. Tehle
------------------------
David M. Tehle
Executive Vice President,
Secretary and
Chief Financial Officer
Signed on behalf of the
registrant and as principal
financial officer.
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