UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
JANUARY 13, 1999
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DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED)
HAGGAR CORP.
(Exact name of registrant as specified in the charter)
NEVADA 0-20850 75-2187001
(State or other jurisdiction of (Commission (I.R.S. Employer
incorporation or organization) file number) Identification Number)
6113 LEMMON AVENUE
DALLAS, TEXAS 75209
(Address of principal executive offices including zip code)
(214) 352-8481
(Registrant's telephone number, including area code)
- --------------------------------------------------------------------------------
Index to exhibits appears on sequentially numbered page 12.
1
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On January 13, 1999, Haggar Clothing Co. (Haggar), a wholly-owned subsidiary
of the registrant, Haggar Corp., completed the previously announced
acquisition of Jerell, Inc. ("Old Jerell"), a Texas corporation engaged in
the design and marketing of women's apparel. Pursuant to an Agreement and
Plan of Merger dated December 17, 1998 (the "Agreement"), Old Jerell was
merged into a Texas corporation recently formed as a wholly-owned subsidiary
of Haggar. Immediately thereafter, the Texas subsidiary was merged into a
newly formed Nevada corporation which is also a wholly-owned subsidiary of
Haggar, and the name of the surviving Nevada subsidiary was changed to
Jerell, Inc. ("New Jerell").
The purchase price for the acquisition was determined by arm's-length
negotiation among the parties. In connection with the merger, Haggar paid
cash consideration of $36.9 million to the shareholders of Old Jerell, all of
whom were directors, officers, employees or previous employees (or affiliates
thereof) of Old Jerell. The total cash consideration is subject to certain
post-closing adjustments related to Old Jerell as of the closing date. In
order to facilitate these post-closing adjustments and provide a source of
recovery for any breaches of representations by Old Jerell, the shareholders
of Old Jerell have deposited $2.0 million in escrow with Chase Bank of Texas
to be held until January 13, 2000. In addition, a shareholder of Old Jerell
also deposited $1.5 million with Chase Bank of Texas of which various amounts
will be distributed in annual installments to the shareholder through January
13, 2002.
Pursuant to the Agreement, Haggar also paid $0.4 million to a certain
executive officer of Old Jerell in consideration for a covenant not to
compete with New Jerell. Immediately subsequent to the acquisition, Haggar
repaid $4.7 million in indebtedness incurred by Old Jerell pursuant to a
third party factoring agreement. In addition, Haggar incurred approximately
$0.2 million in expenses attributable to the acquisition. Of the $42.2
million aggregate acquisition cost, Haggar borrowed $20.0 million under its
existing credit facility with Chase Bank of Texas, received $2.8 million from
the repayment of loans from certain shareholders of Old Jerell, and funded
the balance from working capital.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements of Businesses Acquired
Jerell, Inc.'s financial statements for the year ending October
31, 1998, are filed as part of this report and are listed as
Exhibit 99(a) of this report.
(b) Pro forma Financial Information
Pro Forma financial statements filed as part of this report are
listed on the Index of Financial Information on page 4 of this
report.
(c) Exhibits
(2) Agreement and Plan of Merger dated December 17, 1998, among
Haggar Clothing, Co., JI Acquisition, Inc., Jerell, Inc.,
and the shareholders named therein.
(10) (a) Escrow Agreement dated January 13, 1999, among Hagger
Clothing Co., Chase Bank of Texas, and the Seller
Representive named therein.
(b) Restated Employment Agreement effective November 1,
1994, between Jerell, Inc., and the Employee named
therein.
(c) First Amendment to Restated Employment Agreement
dated January 13, 1999, among Jerell, Inc., Haggar
Clothing Co., and the Employee named therein.
(99) (a) Financial statements of Jerell, Inc. for the year
ending October 31, 1998, including Report of Independent
Public Accountants.
(b) Consent of Independent Public Accountants.
2
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.
Dated: January 28, 1999
HAGGAR CORP.
(Registrant)
By: /s/ DAVID M. TEHLE
------------------------------------
David M. Tehle
(SENIOR VICE PRESIDENT, CHIEF
FINANCIAL OFFICER)
3
HAGGAR CORP.
Index of Financial Information
ITEM 7. (A) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED EXHIBIT NO.
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Financial Statements of Jerell, Inc. for the year
ended October 31, 1998, including the
Report of Independent Auditors..................................... 99(a)
ITEM 7. (B) PRO FORMA FINANCIAL INFORMATION PAGE NO.
-----------
Summary of Information Related to the
Unaudited Condensed Pro Forma
Consolidated Financial Data........................................ 5
Unaudited Condensed Pro Forma Consolidated
Balance Sheet as of September 30, 1998............................. 6 - 7
Notes to Unaudited Condensed Pro Forma
Consolidated Balance Sheet as of
September 30, 1998................................................. 8 - 9
Unaudited Condensed Pro Forma Consolidated Statement of
Operations for the year ending September 30, 1998.................. 10
Notes to Unaudited Condensed Pro Forma Consolidated
Statement of Operations for the year ending
September 30, 1998................................................. 11
ITEM 7. (C) PRO FORMA FINANCIAL INFORMATION
Index of Exhibits.......................................................... 12
4
SUMMARY INFORMATION RELATED TO THE
UNAUDITED CONDENSED PRO FORMA CONSOLIDATED FINANCIAL DATA
The following unaudited condensed pro forma consolidated financial data
consists of the Unaudited Condensed Pro Forma Consolidated Balance Sheet of
Haggar Corp. and its subsidiaries ("Haggar") as of September 30, 1998, and the
Unaudited Condensed Pro Forma Consolidated Statement of Operations of Haggar
for the year ended September 30, 1998 (collectively, the "Pro Forma
Statements"). The Unaudited Condensed Pro Forma Consolidated Balance Sheet
gives effect to the purchase of the common stock of Jerell, Inc. ("Jerell")
(the "Transaction") as if the Transaction had occurred on September 30, 1998.
The Unaudited Condensed Pro Forma Consolidated Statement of Operations for
the year ending September 30, 1998, gives effect to the Transaction as if the
Transaction had occurred on October 1, 1997.
The Pro Forma Statements do not purport to represent what the results of
operations of Haggar would actually have been if the aforementioned
Transaction in fact had occurred on the assumed dates, or to project the
results of operations for any future periods or at any future date.
5
HAGGAR CORP. AND SUBSIDIARIES
UNAUDITED-CONDENSED PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF SEPTEMBER 30, 1998
(IN THOUSANDS)
PURCHASE OF JERELL, INC.
HISTORICAL ------------------------- PRO FORMA
ASSETS BALANCES DEBIT CREDIT BALANCES
---------- ---------- ---------- ---------
Current assets:
Cash and cash equivalents $ 20,280 $ 126(a) $ 4,741(b) $ 1,635
2,817(c) 444(e)
660(d) 37,063(g)
20,000(f)
Accounts receivable, net 63,613 4,172(a) 72,526
4,741(b)
Inventories 92,244 7,374(a) 400(h) 99,218
Deferred tax benefit 7,623 186(a) 7,809
Other current assets 1,557 3,179(a) 2,817(c) 1,919
-------- ---------- ---------- --------
Total current assets 185,317 43,255 45,465 183,107
Property, plant and equipment, net 64,424 1,127(a) 65,551
Goodwill, net -- 27,129(g) 27,129
Other assets 2,234 1,162(a) 3,840
444(e)
-------- ---------- ---------- --------
Total Assets $251,975 $73,117 $45,465 $279,627
-------- ---------- ---------- --------
-------- ---------- ---------- --------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 22,995 $ 3,745(a) $ 26,740
Accrued liabilities 31,261 2,150(a) 34,371
660(d)
300(h)
Short-term borrowings 3,453 3,453
Current portion of
long-term debt 3,854 155(a) 4,009
-------- ---------- ---------- --------
Total current liabilities 61,563 7,010 68,573
Long-term debt 24,937 642(a) 45,579
20,000(f)
-------- ---------- ---------- --------
Total liabilities 86,500 27,652 114,152
6
HAGGAR CORP. AND SUBSIDIARIES
UNAUDITED-CONDENSED PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF SEPTEMBER 30, 1998
(IN THOUSANDS)
Stockholders' equity:
Common stock, $0.10 par value 857 857
Additional paid-in capital 41,860 41,860
Retained earnings 128,329 128,329
-------- ---------- ---------- --------
171,046 171,046
Less - Treasury stock at cost (5,571) (5,571)
-------- ---------- ---------- --------
Total stockholders'
equity 165,475 165,475
Total liabilities and
stockholders' equity $251,975 $ -- $ 27,652 $279,627
-------- ---------- ---------- --------
-------- ---------- ---------- --------
The accompanying notes are an integral part of this statement.
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HAGGAR CORP. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED PRO FORMA
CONSOLIDATED BALANCE SHEET
AS OF SEPTEMBER 30, 1998
The unaudited condensed pro forma consolidated balance sheet as of September
30, 1998, combines the following information (in thousands):
1. The historical consolidated balance sheet of Haggar Corp. and
subsidiaries as of September 30, 1998,
2. The historical consolidated balance sheet of Jerell, Inc. as of
October 31, 1998, and
3. The sources and uses of funds to acquire the Jerell, Inc. stock
as follows:
Sources of Funds: Amount
--------
Excess cash on hand available for investment $18,771
Borrowings under revolving line of credit 20,000
Payment of notes receivable due from former
stockholders of Jerell, Inc. 2,817
Payment by former stockholders of Jerell, Inc.
for tax withholdings 660
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Total Sources of Funds $42,248
-------
-------
Uses of Funds:
Purchase of stock $36,863
Payment pursuant to non-compete agreements 444
Payment of funds borrowed from factor 4,741
Costs and expenses related to the purchase of stock 200
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Total Uses of Funds $42,248
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HAGGAR CORP. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED PRO FORMA
CONSOLIDATED BALANCE SHEET
AS OF SEPTEMBER 30, 1998
Pro forma adjustments to reflect the acquisition of Jerell, Inc. are as
follows (in thousands):
(a) To record the book value of account balances of Jerell, Inc.
at October 31, 1998.
(b) To record the payment of funds borrowed
from factor......................................................... $4,741
(c) To record the payment of notes receivable
due from former stockholders........................................ $2,817
(d) To record the payment by former stockholders
for tax withholdings................................................ $660
(e) To record the payment of non-compete
agreements with certain executive officers
of Jerell, Inc. .................................................... $444
(f) To record funds borrowed under the
revolving line of credit ........................................... $20,000
(g) To record goodwill:
Purchase of stock....................................... $36,863
Transaction costs....................................... 200
-------
Total consideration paid for stock................... 37,063
Less: Net book value of
assets acquired and
liabilities assumed..................................... (10,634)
Adjustment to record
assets acquired and liabilities
assumed at fair market value............................ 700
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Goodwill recorded.................................... $27,129
-------
-------
(h) To record assets acquired and liabilities assumed at
fair market value:
Inventories............................................ $400
Accrued liabilities.................................... 300
----
Total.................................................. $700
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----
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HAGGAR CORP. AND SUBSIDIARIES
UNAUDITED-CONDENSED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDING SEPTEMBER 30, 1998
(IN THOUSANDS)
Historical Pro Forma
Year Ending Jerell, Inc. Acquisition Year Ending
Sept. 30,1998 Operations Adjustments Sept. 30,1998
------------- ------------ ----------- -------------
Net Sales $402,475 $65,795 (a) $468,270
Cost of goods sold 277,713 45,490 (a) 323,203
-------- ---------- ----------- --------
Gross profit 124,762 20,305 (a) 145,067
Selling and administrative expenses (112,296) (14,257)(a) (1,467)(b) (128,020)
Royalty Income 2,878 2,878
-------- ---------- ----------- --------
Operating Income 15,344 6,048 (a) (1,467) 19,925
Other income, net 1,094 (66)(a) 1,028
Interest expense (3,452) (630)(a) (2,016)(c) (6,098)
-------- ---------- ----------- --------
Income before provision (benefit)
for income taxes 12,986 5,352 (a) (3,483) 14,855
Provision (benefit) for income taxes 4,962 1,913 (a) (671)(d) 6,204
-------- ---------- ----------- --------
Net Income $8,024 $3,439 (a) $(2,812) $8,651
-------- ---------- ----------- --------
-------- ---------- ----------- --------
Net income per common share $0.94 $1.01
Weighted average shares
outstanding 8,545 8,545
The accompanying notes are an integral part of this statement.
10
HAGGAR CORP. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED PRO FORMA
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDING SEPTEMBER 30, 1998
The unaudited condensed pro forma consolidated statement of operations for the
year ending September 30, 1998, combine the following information:
1. The historical condensed consolidated statement of operations for
Haggar Corp. for the year ending September 30, 1998,
2. The historical condensed consolidated statement of operations of
Jerell, Inc. for the year ending October 31, 1998, and
3. Pro forma adjustments to reflect the Transaction as if the
Transaction had occurred on October 1, 1997, are as
follows (in thousands):
(a) To record Jerell, Inc. operations for the twelve month
period ending October 31, 1998.
(b) The pro forma adjustments to selling and administrative
expenses are as follows:
To recognize the amortization of goodwill......... $1,356
To recognize the amortization of
non-compete agreements..................... 111
------
Total.................................... $1,467
(c) To recognize the incremental interest expense
due to the revolving line of credit debt at 6.3%,
which is the average rate for the twelve months
ending September 30, 1998, offset by the reduction in
interest expense due to the payment of funds borrowed
from a factor at 9%...................................... $2,016
(d) To recognize the incremental federal and
state income taxes resulting from the
consolidation of Jerell, Inc. operating and
the pro forma adjustments, using an effective rate
of approximately 38.5%................................... ($671)
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INDEX TO EXHIBITS
EXHIBIT
NUMBERS DESCRIPTION
- ------- -----------
(2) Agreement and Plan of Merger dated December 17, 1998, among
Haggar Clothing, Co., JI Acquisition, Inc., Jerell, Inc.,
and the shareholders named therein.
(10) (a) Escrow Agreement dated January 13, 1999, among Hagger
Clothing Co., Chase Bank of Texas, and the Seller
Representive named therein.
(b) Restated Employment Agreement effective November 1,
1994, between Jerell, Inc., and the Employee named
therein.
(c) First Amendment to Restated Employment Agreement
dated January 13, 1999, among Jerell, Inc., Haggar
Clothing Co., and the Employee named therein.
(99) (a) Financial statements of Jerell, Inc. for the year
ending October 31, 1998, including Report of Independent
Public Accountants.
(b) Consent of Independent Public Accountants.
12