<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 DECEMBER 31, 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 February 4, 2002, there were 6,355,795, shares of the Registrant's
Common Stock outstanding.
<Page>
HAGGAR CORP. AND SUBSIDIARIES
INDEX
<Table>
Part I. Financial Information
Item 1. Financial Statements
Consolidated Statements of Operations
(Three months ended December 31, 2001 and 2000) 3
Consolidated Balance Sheets
(As of December 31, 2001 and September 30, 2001) 4
Consolidated Statements of Cash Flows
(Three months ended December 31, 2001 and 2000) 5
Notes to Consolidated Financial Statements 6-10
Item 2. Management's Discussion and Analysis of Financial Condition
andResults 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
December 31,
--------------------
2001 2000
--------- ---------
Net sales $ 99,330 $ 99,856
Cost of goods sold 68,736 66,970
Gross profit 30,594 32,886
Selling, general and administrative expenses (29,906) (32,435)
Royalty income, net 395 450
--------- ---------
Operating income 1,083 901
Other income, net 40 30
Interest expense (1,011) (968)
--------- ---------
Income (loss) before provision for income taxes
and cumulative effect of accounting change 112 (37)
Provision for income taxes 40 108
--------- ---------
Income (loss) before cumulative effect of accounting
change $ 72 $ (145)
Cumulative effect of accounting change (15,578) -
--------- ---------
Net income (loss) $ (15,506) $ (145)
========= =========
Income (loss) per common share before cumulative effect
of accounting change - Basic and Diluted $ 0.01 $ (0.02)
Cumulative effect of accounting change per common
share - Basic and Diluted $ (2.44) $ -
Net income (loss) per common share - Basic and Diluted $ (2.43) $ (0.02)
Weighted average number of common shares
outstanding - Basic 6,381 6,527
========= =========
Weighted average number of common shares
and common share-equivalents outstanding - Diluted 6,381 6,527
========= =========
</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>
December 31,
2001 September 30,
(unaudited) 2001
----------- --------
ASSETS
Current assets:
Cash and cash equivalents $ 4,372 $ 7,800
Accounts receivable, net 40,250 69,047
Due from factor 1,634 2,252
Inventories 110,067 97,726
Deferred tax benefit 11,290 11,290
Other current assets 4,226 2,215
-------- --------
Total current assets 171,839 190,330
Property, plant, and equipment, net 50,538 51,975
Goodwill, net 9,472 25,050
Other assets 7,646 7,870
-------- --------
Total assets $239,495 $275,225
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 25,754 $ 35,645
Accrued liabilities 24,023 25,374
Accrued wages and other employee compensation 2,547 5,103
Accrued workers' compensation 2,596 3,645
Current portion of long-term debt 3,993 4,021
-------- --------
Total current liabilities 58,913 73,788
Long-term debt 44,700 49,338
-------- --------
Total liabilities 103,613 123,126
Commitments and contingencies
Stockholders' equity:
Common stock - par value $0.10 per share; 25,000,000
shares authorized; 8,591,000 shares issued at
December 31, 2001 and September 30, 2001, respectively. 859 859
Additional paid-in capital 42,014 42,014
Cumulative translation adjustment (591) (550)
Retained earnings 118,485 134,310
-------- --------
160,767 176,633
Less - Treasury stock, 2,235,205 and 2,203,705 shares
at cost at December 31, 2001 and September 30, 2001,
respectively. (24,885) (24,534)
-------- --------
Total stockholders' equity 135,882 152,099
-------- --------
Total liabilities and stockholders' equity $239,495 $275,225
======== ========
</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>
Three Months Ended
December 31,
---------------------
2001 2000
---------- -------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (15,506) $ (145)
Adjustments to reconcile net loss to net cash provided by
(used in) operating activities:
Cumulative effect of accounting change 15,578 -
Depreciation and amortization 2,182 3,152
Changes in assets and liabilities:
Accounts receivable, net 28,797 21,333
Due from factor 618 (1,253)
Inventories (12,341) (8,597)
Other current assets (2,011) (722)
Accounts payable (9,891) (4,363)
Accrued liabilities (1,351) (6,218)
Accrued wages, workers compensation and other employee
compensation (3,605) (5,522)
---------- -------
Net cash provided by (used in) operating activities 2,470 (2,335)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property, plant, and equipment, net (745) (833)
Decrease (increase) in other assets 224 (491)
---------- -------
Net cash used in investing activities (521) (1,324)
CASH FLOWS FROM FINANCING ACTIVITIES
Purchase of treasury stock at cost (351) (554)
Proceeds from issuance of long-term debt 16,000 31,000
Proceeds from issuance of common stock - 62
Payments on long-term debt (20,666) (24,794)
Payments of cash dividends (319) (324)
---------- -------
Net cash (used in) provided by financing activities (5,336) 5,390
Effects of exchange rates on cash and cash equivalents (41) (194)
(Decrease) Increase in cash and cash equivalents (3,428) 1,537
Cash and cash equivalents, beginning of period 7,800 6,238
---------- -------
Cash and cash equivalents, end of period $ 4,372 $ 7,775
========== =======
Supplemental disclosure of cash flow information
Cash paid for:
Interest $ 1,316 $ 1,571
Income taxes $ 105 $ 2,128
</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 December 31, 2001, and the consolidated
statements of operations and cash flows for the three months ended December
31, 2001 and 2000, have been prepared by Haggar Corp. (the "Company") without
audit. In the opinion of management, all adjustments necessary (which
include only normal recurring adjustments) to present fairly the consolidated
financial position, results of operations, and cash flows of the Company at
December 31, 2001, 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, 2001.
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 23.1% and 25.4% of the
Company's net sales for the three months ended December 31, 2001 and 2000,
respectively. The Company's second largest current customer, Kohl's
Department Stores, Inc., accounted for 15.7% and 11.5% of the Company's net
sales for the three months ended December 31, 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 STANDARD
The Financial Accounting Standards Board recently issued SFAS No. 143,
"Accounting for Asset Retirement Obligations", and SFAS No. 144, "Accounting
for the Impairment or Disposal of Long-Lived Assets." The adoption of SFAS
No. 143 and 144 is not expected to have a material affect on the consolidated
financial statements.
INVENTORIES.
Inventories are stated at the lower of cost (first-in, first-out) or market
and consisted of the following at December 31, 2001, and September 30, 2001
(in thousands):
<Table>
<Caption>
December 31, September 30,
2001 2001
------------ -------------
Piece goods $ 12,326 $ 11,947
Trimmings & supplies 2,785 2,781
Work-in-process 13,208 14,068
Finished garments 81,748 68,930
--------- ---------
$ 110,067 $ 97,726
========= =========
</Table>
Work-in-process and finished garments inventories consisted of materials,
labor and manufacturing overhead.
6
<Page>
GOODWILL
On October 1, 2001, the Company adopted Statement of Financial Accounting
Standards No. 142, "Goodwill and Other Intangible Assets" ("SFAS No. 142")
and recorded a $15.6 million impairment of goodwill related to the 1999
acquisition of Jerell, the Company's women's wear subsidiary. Subsequent to
the acquisition, pricing pressures and a weak retail environment for women's
apparel have resulted in a revised earnings forecast for Jerell. In order to
determine the fair value of goodwill, the Company obtained an independent
appraisal which considered both prices of comparable businesses and the
discounted value of projected cash flows.
The change in the carrying amount of goodwill for the three months ended
December 31, 2001 is as follows:
<Table>
Balance as of October 1, 2001 $ 25,050
Impairment loss under SFAS No. 142 (15,578)
---------
Balance as of December 31, 2001 $ 9,472
=========
</Table>
The following reflects the Company's income (loss) before cumulative effect
of accounting change and net income (loss) adjusted to exclude goodwill
amortization for all periods presented.
<Table>
<Caption>
Three Months Three Months
Ended Ended
12/31/01 12/31/00
-------- --------
Income (loss) before cumulative effect of
accounting change $ 72 $ (145)
Add back: goodwill amortization - 375
------------ -----------
Adjusted income (loss) before cumulative effect
of accounting change $ 72 $ 230
============ ===========
Basic and diluted earnings per share:
Income (loss) before cumulative effect of
accounting change $ 0.01 $ (0.02)
Add back: goodwill amortization - 0.06
------------ -----------
Adjusted income (loss) before cumulative effect of
accounting change $ 0.01 $ 0.04
============ ===========
Reported net loss $ (15,506) $ (145)
Add back: goodwill amortization - 375
------------ -----------
Adjusted net income (loss) $ (15,506) $ 230
============ ===========
Basic and diluted earnings per share:
Reported net loss $ (2.43) $ (0.02)
Add back: goodwill amortization - 0.06
------------ -----------
Adjusted net income (loss) $ (2.43) $ 0.04
============ ===========
</Table>
7
<Page>
LONG-TERM DEBT
Long-term debt consisted of the following at December 31, 2001, and September
30, 2001 (in thousands):
<Table>
<Caption>
December 31, September 30,
2001 2001
------------ -------------
Borrowings under revolving credit line $ 35,000 $ 36,000
Industrial Development Revenue
Bonds with interest at a rate equal
to that of high-quality, short-term,
tax-exempt obligations, as defined
(1.8% at December 31, 2001 and 2.4 %
at September 30, 2001),
payable in annual installments of
$100 to $200 and a final payment of
$2,000 in 2005, secured by
certain buildings and equipment 2,300 2,400
Allstate notes 10,714 14,285
Other 679 674
--------- ---------
48,693 53,359
Less - Current portion 3,993 4,021
--------- ---------
$ 44,700 $ 49,338
========= =========
</Table>
Net assets mortgaged or subject to lien under the Industrial Development
Revenue Bonds totaled approximately $595,000 at December 31, 2001.
As of December 31, 2001, the Company had a revolving credit line agreement
(the "Agreement") with certain banks subject to certain borrowing base
limitations. The Company had additional available borrowing capacity of
approximately $49.0 million under this Agreement at December 31, 2001. The
Company incurred approximately $38,000 in commitment fees related to the
available borrowing capacity during the quarter ended December 31, 2001. The
interest rates for the quarter ended December 31, 2001, ranged from 3.47% to
6.0%. The facility will mature June 30, 2003, unless renewed and is
unsecured. The Agreement prohibits the Company from pledging its account
receivables and inventories, contains limitations on incurring additional
indebtedness and requires the maintenance of certain financial ratios. In
addition, the Agreement requires the Company to maintain net worth in excess
of the net worth of the preceding fiscal year plus 50% of the Company's
consolidated net income ($121.9 million as of December 31, 2001). The
Company's main operating subsidiary, Haggar Clothing Co., must maintain net
worth of $40.0 million. The Company amended the Agreement on January 9,
2002, to exclude from the computation of Haggar Clothing Co.'s net worth the
$15.6 million non-cash cumulative effect of accounting change related to SFAS
No. 142. The Agreement prohibits the payment of any dividend if a default
exists after giving effect to such dividend.
Long-term debt also includes $10.7 million in senior notes. Significant
terms of the senior notes include interest payable semi-annually at 8.49% per
annum and annual principal payments through 2005. The terms and conditions
of the note purchase agreement governing the senior notes include restriction
on the sale of assets, limitations on additional indebtedness and the
maintenance of certain net worth requirements.
8
<Page>
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. Severance and other
employee related payments of $5.3 million have been made as of December 31,
2001, and all other employee termination costs are expected to be paid by the
end of fiscal 2003.
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.
Many 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
September 30, 2001 Payments December 31, 2001
------------------ -------- -----------------
Employee termination and related costs $ 2.0 $ (0.4) $ 1.6
Legal costs 6.3 (0.1) 6.2
------ ------- ------
Total Reorganization Costs $ 8.3 $ (0.5) $ 7.8
====== ======= ======
</Table>
COMMITMENTS AND CONTINGENCIES
The Company had approximately $30.0 million in outstanding letters of credit
at December 31, 2001, primarily in connection with certain self-insurance
agreements and certain inventory purchases of the Company.
The Company is involved in various claims and lawsuits incidental to its
business. In the opinion of management, these claims and suits in the
aggregate will not have a material adverse effect on the Company's financial
position or the results of operations for future periods.
SUBSEQUENT EVENTS
WESLACO
The Company announced in January 2002 that it will close its Weslaco, Texas
cutting facility over the next three to four months. This closure, which
impacts 134 employees, is part of the Company's ongoing restructuring of its
manufacturing processes due to competitive pressures in the global market
place. The Company believes the charge to operations will range from $0.6
million to $1.0 million for the related employee severance costs and
equipment write-offs.
DIVIDEND DECLARED
9
<Page>
On January 22, 2002, the Company declared a cash dividend of $0.05 per share
payable to the stockholders of record on February 4, 2002. The dividend of
approximately $319,000 will be paid on February 18, 2002.
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,
2001.
RESULTS OF OPERATIONS
The Company's first quarter fiscal 2002 net loss of $15.5 million was higher
than the net loss of $0.1 million in the first quarter fiscal 2001. The
variance in the net loss relates mainly to the $15.6 million cumulative
effect of the accounting change recorded as a result of adopting SFAS No. 142.
Net sales for the first quarter of fiscal 2002 were $99.3 million compared to
$99.9 million for the first quarter of fiscal 2001.
Gross profit as a percentage of net sales decreased in the first quarter of
fiscal 2002 to 30.8% compared to 32.9% in the first quarter of the prior
fiscal year. Gross profit decreased mainly due to lower selling prices
resulting from continued price pressures at retail.
Selling, general and administrative expenses as a percentage of net sales
decreased to 30.1% in the first quarter of fiscal 2002 compared to 32.5% in
the first quarter of fiscal 2001. Actual selling, general and administrative
expenses decreased $2.5 million for the first quarter of fiscal 2002 as
compared to the first quarter of fiscal 2001. The overall decrease in
selling, general and administrative expenses from fiscal 2001 relates to
decreases in selling, marketing, and advertising costs of $5.0 million and
reduced expenses of $0.6 million related to the closing of Japan operations
in fiscal 2001. The decreases are partially offset by expenses attributable
to licensing activities of $0.9 million, increased property insurance,
healthcare, and other employee benefit costs of $2.2 million.
Royalty income for the first quarter of fiscal 2002 decreased slightly from
the first quarter of fiscal 2001, primarily due to reduced domestic licensee
sales.
GOODWILL
On October 1, 2001, the Company adopted Statement of Financial Accounting
Standards No. 142, "Goodwill and Other Intangible Assets" ("SFAS No. 142")
and recorded a $15.6 million impairment of goodwill related to the 1999
acquisition of Jerell, the Company's women's wear subsidiary. Subsequent to
the acquisition, pricing pressures and a weak retail environment for women's
apparel have resulted in a revised earnings forecast for Jerell. In order to
determine the fair value of goodwill, the Company obtained an independent
appraisal which considered both prices of comparable businesses and the
discounted value of projected cash flows.
The change in the carrying amount of goodwill for the three months ended
December 31, 2001 is as follows:
<Table>
Balance as of October 1, 2001 $ 25,050
Impairment loss under SFAS No. 142 (15,578)
---------
Balance as of December 31, 2001 $ 9,472
=========
</Table>
The following reflects the Company's income (loss) before cumulative effect
of accounting change and net income (loss) adjusted to exclude goodwill
amortization for all periods presented.
10
<Page>
<Table>
<Caption>
Three Months Three Months
Ended Ended
12/31/01 12/31/00
-------- --------
Income (loss) before cumulative effect of
accounting change $ 72 $ (145)
Add back: goodwill amortization - 375
-------- --------
Adjusted income (loss) before cumulative effect
of accounting change $ 72 $ 230
======== ========
Basic and diluted earnings per share:
Income (loss) before cumulative effect of
accounting change $ 0.01 $ (0.02)
Add back: goodwill amortization - 0.06
-------- --------
Adjusted income (loss) before cumulative effect of
accounting change $ 0.01 $ 0.04
======== ========
Reported net loss $(15,506) $ (145)
Add back: goodwill amortization - 375
-------- --------
Adjusted net income (loss) $(15,506) $ 230
======== ========
Basic and diluted earnings per share:
Reported net loss $ (2.43) $ (0.02)
Add back: goodwill amortization - 0.06
-------- --------
Adjusted net income (loss) $ (2.43) $ 0.04
======== ========
</Table>
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. Severance and other
employee related payments of $5.3 million have been made as of December 31,
2001, and all other employee termination costs are expected to be paid by the
end of fiscal 2003.
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.
Many 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.
11
<Page>
The reorganization costs before tax are summarized as follows (in millions):
<Table>
<Caption>
Balance Balance
September 30, 2001 Payments December 31, 2001
------------------ -------- -----------------
Employee termination and related costs $ 2.0 $ (0.4) $ 1.6
Legal costs 6.3 (0.1) 6.2
------ ------- ------
Total Reorganization Costs $ 8.3 $ (0.5) $ 7.8
====== ======= ======
</Table>
LIQUIDITY AND CAPITAL RESOURCES
The Company's trade accounts receivable potentially expose the Company to
concentrations of credit risks as 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 decreased approximately $28.8 million to $40.2 million at
December 31, 2001, from $69.0 million at September 30, 2001. The decreases in
trade accounts receivable from September 30, 2001 is primarily the result of
seasonality consistent with the same quarter of the prior year. In addition,
the Company's due from factor decreased from $2.2 million at September 30,
2001, to $1.6 million at December 31, 2001. The decrease in due from factor
relates to decreased sales in the specialty store women's wear division.
Inventories as of December 31, 2001, increased to $110.1 million from $97.7
million at September 30, 2001. The increase in inventory levels during the
first quarter of fiscal 2002 is due to an increase in finished goods in
anticipation of higher forecasted sales for the second quarter of fiscal
2002.
The Company has a revolving credit line facility with certain banks. As of
December 31, 2001, the Company had available additional borrowing capacity of
approximately $49.0 million under that facility. The Company incurred
approximately $38,000 in commitment fees related to the available borrowing
capacity during the first quarter of fiscal 2002. The interest rates during
the first quarter of fiscal 2002 ranged from 3.47% to 6.0%. The facility
will mature June 30, 2003, with a one-year renewal at the option of the banks.
The Company provided cash from operating activities for the three months
ended December 31, 2001, primarily as a result of a net reduction in accounts
receivable and due from factor of $29.4 million offset by decreases in
accounts payable and accrued liabilities of $14.8 million and an increase in
inventories of $12.3 million. The Company used cash in investing activities
of $0.5 million during the first three months of fiscal 2002 mainly for the
purchase of property, plant, and equipment of $0.7 million. Cash flows used
in financing activities of $5.3 million for the three months ended December
31, 2001, were primarily the result of a net decrease in long-term debt of
$4.7 million.
By comparison, the Company used cash in operating activities for the three
months ended December 31, 2000, primarily as a result of an increase in
inventories of $8.6 million, decreases in accounts payable and accrued
liabilities of $16.1 million and offset by a reduction in accounts receivable
and due from factor of $20.1 million. The Company used cash in investing
activities of $1.3 million during the first three months of fiscal 2001
mainly for the purchase of property, plant and equipment of $0.8 million.
Cash flows provided by financing activities of $5.4 million for the three
months ended December 31, 2000, were primarily as the result of a net
increase in long-term debt of $6.2 million to fund ongoing operations, offset
by dividends and the purchase of treasury stock.
12
<Page>
The Company believes that the cash flows 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.
COMMITMENTS AND CONTINGENCIES
The Company had approximately $30.0 million in outstanding letters of credit
at December 31, 2001, primarily in connection with certain self-insurance
agreements and certain inventory purchases of the Company.
The Company is involved in various claims and lawsuits incidental to its
business. In the opinion of management, these claims and suits in the
aggregate will not have a material adverse effect on the Company's financial
position or the results of operations for future periods.
NEW ACCOUNTING STANDARD
The Financial Accounting Standards Board recently issued SFAS No. 143,
"Accounting for Asset Retirement Obligations", and SFAS No. 144, "Accounting
for the Impairment or Disposal of Long-Lived Assets." The adoption of SFAS
No. 143 and 144 is not expected to have a material affect on the consolidated
financial statements.
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,
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- Inflation,
- Acquisition or dissolution of business enterprises,
- Natural disasters, and
- Unusual or infrequent items that cannot be foreseen or are not
susceptible to estimation.
SUBSEQUENT EVENTS
WESLACO
The Company announced in January 2002 that it will close its Weslaco, Texas
cutting facility over the next three to four months. This closure, which
impacts 134 employees, is part of the Company's ongoing restructuring of its
manufacturing processes due to competitive pressures in the global market
place. The Company believes the charge to operations will range from $0.6
million to $1.0 million for the related employee severance costs and
equipment write-offs.
DIVIDEND DECLARED
On January 22, 2002, the Company declared a cash dividend of $0.05 per share
payable to the stockholders of record on February 4, 2002. The dividend of
approximately $319,000 will be paid on February 18, 2002.
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 December 31, 2001, the Company had $35.0
million outstanding under its revolving credit line agreement and $10.7
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) Ninth Amendment to First Amended and Restated Credit
Agreement dated January 9, 2002, between the Company and Chase Manhattan
Bank, as agent for a bank syndicate.
(b) A Form 8-K was filed on November 7, 2001. The Form 8-K filed related to
the Company's 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: February 4, 2002 By: /s/ David M. Tehle
--------------------------------
David M. Tehle
Executive Vice President
Chief Financial Officer
Signed on behalf of the
registrant and as principal
financial officer.
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