SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

____________________

FORM 10-K

FOR ANNUAL AND TRANSITION REPORTS

PURSUANT TO SECTIONS13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

(Mark One)

[X] Annual Report Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934

For the fiscal year ended December 30, 2000
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 1-605
Hampton Industries, Inc.
(Exact name of registrant as specified in its charter)
North Carolina
56-0482565 
(State or other jurisdiction of incorporation or organization)
(IRS Employer Identification No.)
2000 Greenville Hwy., P.O. Box 614, Kinston, NC
28502-0614
(Address of principal executive offices)
(ZIP Code)
Registrant's telephone number, including area code: (252) 527-8011 
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Name of each exchange on which registered
Common Stock of $1.00 par value share 
American Stock Exchange 
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by 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 preceding 12 months (or for such shorter period that the registrant wasrequired to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES XNo

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant's knowledge, in definitive proxy or information statements incorporatedby reference in Part III of this Form 10-K or any amendment to this Form 10-K. ý
On April 16, 2001, the aggregates market value of the common shares (based upon the closing prices of these shares on the American Stock Exchange) of Hampton Industries, Inc. held by non-affiliates was approximately $2,721,000. 

The number of shares of the registrant's Common Stock outstanding as of April 16, 2001 was 5,553,374.
** 

 

PART I

ITEM 1. BUSINESS**
(a) 	General Development of Business

Hampton Industries, Inc. and its subsidiaries and divisions (herein referred to as "Hampton" or "Company") are engaged in the business of manufacturing and selling apparel. Hampton, a North Carolina Corporation, is the successor ofseveral predecessor corporations, the first of which was incorporated in 1925 in the State of New York under the name of Hampton Shirt Company.

(b)	Financial Information about Industry Segments

Hampton has been engaged in one line of business in excess of five years; reference is made to the financial statements included herein under **ITEM 8. Financial Statements and Supplementary Data.**
(c)	Narrative Description of Business

The Company is engaged in the business of manufacturing and selling apparel and operates in one industry segment. Substantially all sales to third party customers are made to destinations in the United States. The products consist principally of men'sand boys' shirts and men's sleepwear, which are produced domestically and in Central America. In addition, sport and dress shirts, sweaters, activewear, outerwear and swimtrunks, for both men and boys are imported from unaffiliated sources locatedprimarily in the Far East. Hampton's products are principally sold at retail under licensed and Company owned brands. Branded apparel was a significant part of the Company's business and is manufactured and sold under the following licenses: 

LICENSES
PRODUCT CATEGORY
Nautica for Children (1)
Boys', girl's, and infant's apparel
Rawlings
Men's activewear
Dickies (1)
Men's casual and rugged sportshirts

Final sales will occur in 2001

DISCONTINUED LICENSES
PRODUCT CATEGORY
Spalding 
Men's and boys' activewear
Justin 
Men's western wear
Bugle Boy 
Men's and boys' sleepwear and robes
Joe Boxer 
Children's apparel
Warner Brothers 
Men's sleepwear and robes, and children's robes and novelty apparel

 

Hampton owns the following trademarks:

TRADEMARK
PRODUCT CATEGORY
Kaynee
Boys' and girl's school uniforms
Le Tigre
Men's and boys' sportswear
Campus
Men's and boys' sportswear 
Flipbox
Young men's sportswear

As of April 2, 2001 Hampton has sold the assets of its Nautica Division to Nautica Enterprises, Inc. Prior to this transaction Hampton received from Nautica a notice of default under its license agreement. In addition, Hampton has anotice of default from Williamson- Dickie Manufacturing Company for its Dickies license***.*
Hampton designs its line of apparel, which is manufactured from various combinations of man-made and natural fibers that are readily available from a number of sources both domestically and imported. Hampton has no long-term contracts with anysupplier. The average domestic production cycle is approximately five weeks from the time the fabric is scheduled for cutting until the finished product is received at the Company's distribution centers. The production cycle for goods imported ormanufactured in Central America is approximately ten weeks, while the lead time for goods imported from the Far East can be as long as six months. The Company provides the design and production specifications for imported products to the manufacturers.

Hampton's products are sold throughout the United States, to approximately 2,360 customers including most of the country's leading national and regional retail chains and department stores. Sales are made by a nationwide sales staff of 36 salesmen atthe end of 2000. The Company's sales office is located in New York, and the Company's executive and administrative headquarters is in Kinston, North Carolina. As of December 30, 2000 the Company had approximately 437 full-time associates domestically andapproximately 548 associates in the Caribbean*.* Hampton is not a party to any collective bargaining agreements, has never experienced a strike, and believes that it maintains satisfactory relationships with its associates.

Hampton's three largest customers accounted for approximately 24%, 33%, and 32% of consolidated sales volume in 2000, 1999, and 1998, respectively. K-Mart, Wal-Mart Stores, Inc. and J.C. Penney Co. are large multi-outlet retail chains who purchase abroad range of Hampton's products through a variety of their merchandising departments. There are no long-term contracts with these customers for continued business, other than purchase orders already received. The following is a breakdown of theirrespective sales volume for each of the last three fiscal years: 

	
2000
 
1999
 
1998
K-Mart
11%
 
12%
 
6%
Wal-Mart Stores, Inc.
 7%
 
 8%
 
12%
J.C. Penney Co.
 6%
 
13%
 
14%
 
24%
 
33%
 
32%

 

The following is a breakdown of sales by apparel categories for each of the last three fiscal years: 

	
2000
 
1999
 
1998
Men's shirts and sportswear 
25%
 
28%
 
31%
Boys' shirts and sportswear
45%
 
31%
 
31%
Activewear
12%
 
15%
 
12%
Men's sleepwear
16%
 
14%
 
13%
Ladies' sleepwear
2%
 
11%
 
12%
Other
-
 
1%
 
1%
 
100%
 
100%
 
100%

Sales of branded products accounted for 66%, 55%, and 41% of the consolidated sales for 2000 and the prior two years, respectively*.*
The following reflects the Company's sourcing of its products for each of the last three fiscal years: 

	
2000
 
1999
 
1998
Imports
 62%
 
 64%
 
 58%
Caribbean
 27%
 
 22%
 
 24%
Domestic
 11%
 
 14%
 
 18%
 
100%
 
100%
 
100%
	

All foreign purchases are contracted for in U.S. dollars; therefore, there is no currency risk.

As of April 2, 2001 Hampton's backlog of orders was approximately $86,826,000 as compared to $101,272,000 on March 5, 2000. The orders are believed to be firm and are expected to be shipped during the current fiscal year. A portion of these orders wassold to Nautica Enterprises on April 2, 2001 and would reduce this backlog of orders by $31,662,000 to $55,164,000.

The apparel industry is highly competitive as to style, quality and price. Hampton competes with many other manufacturers and suppliers in each of its products.

 
**(d)	Executive Officers of Registrant**

Name and age
Office
First year appointed to current office
David Fuchs (76)
Chairman and Chief Executive Officer
1975
Steven Fuchs (41)
President
1996
Roger M. Eichel (52)
Senior Vice President and Secretary
1993
Frank E. Simms (52)
Chief Financial Officer, Vice President of Finance, and Treasurer
1997

Each of the above named was appointed for one year or until the election of a successor. There is no arrangement or understanding between any of the above pursuant to which they were appointed as Officers. Steven Fuchs has an employmentcontract that, among other things, determines compensation due to separation of employment.

All of the Executive Officers above, except Frank Simms, are related family members. Steven Fuchs is the son of David Fuchs, and Roger Eichel is David Fuchs' son-in-law. 

David Fuchs has held his current executive position in excess of five years. Steven Fuchs was elected to his present position in January 1996. From 1993 to January 1996, Steven Fuchs was the President of Hampton Shirt Co. (a subsidiary). Prior to1993, he held various positions with the Company. Roger Eichel was elected to his present position in May 1993, and prior thereto, he was Secretary of the Company. Frank Simms was elected Chief Financial Officer in November 1997, Treasurer in 1999, andhad previously been Vice President of Finance since May 1995. Prior to joining Hampton he was the Chief Financial Officer of Riverside Manufacturing Co. in excess of five years. 

David Fuchs, Steven Fuchs and Roger Eichel are also Directors of the Company.

 
**ITEM 2. PROPERTIES**
Hampton owns one manufacturing plant in the Caribbean and two domestic distribution centers. At the beginning of 2000, Hampton also owned three domestic manufacturing plants, and an additional distribution center. Plans were made to close, andsubsequently sell, all four of these properties. The sale of these assets took place in the third and fourth quarters of the year 2000. The Company's sales and merchandising personnel occupy a building located in New York City. Hampton's principalexecutive and administrative offices are located in North Carolina. All of these properties are owned by the Company. The New York office is subject to a mortgage loan. This mortgage is secured by the underlying assets, and is not guaranteed by the Company.

As of April 3, 2001 the Company has entered into an agreement to sell the New York sales office for $15,500,000, subject to the assumption of the mortgage by the buyer. The anticipated closing is expected to occur on May 15, 2001. 

The Company believes that its plant and facilities are in good repair and adequate in respect to its foreseeable needs. The machinery and equipment utilized in its facilities are considered by management to be modern and efficient.
**ITEM 3. LEGAL PROCEEDINGS**
There are no significant legal proceedings.

 
**ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS**
None
**PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS**
(a) Principal Market

The principal market on which Hampton's Common Stock is traded is the American Stock Exchange under the symbol "HAI".

(b) Stock Price and Dividend Information

The table below presents the high and low market prices for Hampton's Common Stock.

Quarter Ended
04/01/00
07/01/00
09/30/00
12/30/00
High
2 13/16
2 3/8
1 15/16
1 11/16
Low
1 13/16
1 1/2
1 1/4
5/8
Quarter Ended
03/27/99
06/26/99
09/25/99
01/01/00
High
6
5 3/8
4 1/2
3 1/2
Low
5 1/8
3 3/4
3 5/8
2

The Company has not paid a cash dividend on its common stock since 1973. The Board of Directors declared a 10% stock dividend in 1999 and 1998. Market prices per share have been restated for all periods presented to reflect the stockdividends. The present credit agreement includes restrictive covenants, which, among other things, prevent the payment of cash dividends.

(c) Approximate Number of Holders of Common Stock

The number of holders of record of Hampton's Common Stock as December 30, 2000 was approximately 237, including, as a single holder of record, brokerage firms having more than one stockholder account.
**ITEM 6. SELECTED FINANCIAL DATA**
(In thousands except per common share amounts)
0.001**Year Ended:**2000**1999***1998**1997**1996
Net Sales
$ 182,440 
$ 192,561 
$ 190,330 
$ 163,040 
$ 160,684 
Net (loss) earnings 
$ (30,638)
$ (4,756)
$ 2,416 
$ 1,083 
$ 2,709 
Basic (loss) earnings per common share
$ (5.52)
$ (0.86)
$ 0.44 
$ 0.20 
$ 0.54 
Diluted (loss) earnings per common share ** 
$ (5.52)
$ (0.86)
$ 0.43 
$ 0.19 
$ 0.54 **At Year End:
Total assets
$ 76,632 
$ 118,135 
$ 94,321 
$ 78,042 
$ 74,421 
Long-term debt
$ 220 
$ 11,201 
$ 302 
$ 4,110 
$ 5,103 
Working capital
$ 8,327 
$ 43,997 
$ 40,255 
$ 40,648 
$ 40,158 
Stockholders' equity
$ 20,946 
$ 51,585 
$ 56,342 
$ 53,907 
$ 52,820 
* 53 Weeks
**Potential common shares have been excluded for 2000 and 1999 because they are anti-dilutive.
The Company has not paid cash dividends on its common stock since 1973. The Board of Directors declared a 10% common stock dividend in 1999 and 1998. The dividends were payable on July 2nd of both years, to stockholders of record on June 2nd of both years. Basic and diluted earnings per share and outstanding stock options have been restated for all periods presented to reflect the stock dividends.

The Company uses the LIFO method of costing on principally all of its inventories. The LIFO method decreased the loss by $1,314,300 ($.24 per share) in 2000 and $635,000 ($.11 per share) in 1999. The LIFO method increased earnings by $514,500 ($.09per share) in 1998. Inventory liquidation in 2000 reduced the loss by $1,560,100 ($.28 per share). There was an increase in inventories in 1999 and 1998. 
**ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS**
The following discussion and analyses of the consolidated results of operations and financial conditions should be read in conjunction with the accompanying financial statements and related notes to provide additional information concerning theCompany's financial activities and conditions. 
**Results of Operations

The following table summarizes operating data (as a percent of net sales) for the periods indicated: 

YEAR ENDED
December 30, 2000
January 1, 2000*
December 26, 1998
Net Sales
100.0 
%
100.0 
%
100.0 
%
Cost of products sold
86.7 
75.6 
76.5 
Gross margin
13.3 
24.4 
23.5 
Selling, general and administrative
26.2 
25.8 
20.2 
Equity in earnings of
unconsolidated affiliates
- 
- 
(0.1)
Restructuring charge
0.7 
0.5 
- 
Operating (loss) income
(13.6)
(1.9)
3.4 
Other (income) expense:
Rental income - net
(0.5)
(0.5)
(0.5)
Loss on disposal of fixed assets
0.1 
- 
- 
Other (income) expense - net
(0.1)
0.1 
- 
Interest Expense
3.5 
2.2 
1.9 
(Loss) earnings before (benefit of )
provision for income taxes
(16.6)
(3.7)
2.0 
Net (loss) earnings
(16.8)
%
(2.5)
%
1.3 
%
*53 Weeks
 The Company is engaged in the business of manufacturing and selling apparel and operates in one industry segment. Substantially all sales to third party customers are made to destinations in the United States. The productsconsist principally of men's and boys' shirts and men's and women's sleepwear, which are produced domestically and in Central America. In addition, sport and dress shirts, sweaters, activewear, outerwear and swim trunks, for both men and boys are importedfrom unaffiliated sources located primarily in the Far East.	
**Fiscal 2000 Versus Fiscal 1999

Net sales for 2000 decreased by $10,121,000 or 5.3%. Sales of branded product increased by $13,719,000 to 66% of total sales in 2000 from 55.4% in 1999. The increase in sales of branded products was a result of the closeout sales mentionbelow. Increased sales of the Nautica and Joe Boxer brands were the principal contributors to the increased sales volume. Non branded product sales decreased by $23,840,000.

During fiscal 2000, gross profit decreased by approximately $22,700,000 as compared to the previous year. As a percentage of sales this represented a decrease of 11.1%, from 24.4% in 1999 to 13.3% in 2000. This decline in the gross profit wasprimarily due to substantial closeout sales in the Nautica, Saylu and Joe Boxer product lines. The later two lines, Saylu and Joe Boxer, were discontinued during the current fiscal year.

Selling, general and administrative expenses decreased by $1,941,000 in 2000. These costs were 26.2% of net sales in 2000 as compared to 25.8% in 1999. This decrease was due primarily to reductions in the workforce, freight, and sample costs of$2,405,000, $548,000, and $641,000 respectively. Increases in royalty expense of $557,000 and advertising expenses of $484,000 were primarily due to the increase in sales of branded product. Amortization (store fixtures and software costs) and outletstore rental expenses increased by $245,000 and $300,000, respectively in 2000.

A portion of the Company's corporate office building in New York is leased to third parties. Operations related to this are classified as Rental income - net. 

Other income was $204,000 in 2000 as compared to an expense of $167,000 in 1999. This change is primarily due to the receipt of life insurance proceeds in the year 2000. 

In November of 1999, the Board of Directors of the Company approved a restructuring plan that resulted in the announcement to close two domestic sewing factories located in Warrenton, NC, and Martinsville, VA, leaving one remaining factory inWashington, NC. These closures were due to an increasing shift to sales of branded product, which is primarily imported. The closure in Martinsville was completed in December 1999, and the Warrenton closure was completed in March 2000. This plan alsoincluded the elimination of certain positions within the selling and administrative functions of the Company. The restructuring charge amounted to $936,000, which includes only the direct termination benefits along with the related fringe benefits. Thisplan resulted in the reduction of approximately 298 full time associates or 30% of the domestic work force. This plan was completed during the first quarter of 2000. In addition, this plan included the decision to no longer offer for sale the ladiessleepwear product line. This product line was primarily private label and was the only ladies offerings by the Company.

In June 2000, the Board of Directors of the Company approved an additional restructuring plan that included the closure of the remaining sewing facility in Washington, NC and the cutting operation in Kinston, NC, and the consolidation of thedistribution center in Martinsville. This plan resulted in the reduction of approximately 197 full-time associates, or 20% of the domestic workforce. The restructuring charge amounted to $300,000, which includes only the direct termination benefits alongwith the related fringe benefits. All closed facilities were sold in the third and fourth quarters of 2000.

In September 2000, management implemented a plan to consolidate certain selling divisions and to reorganize certain administrative areas. This plan resulted in the reduction of approximately 42 full time associates, or 6% of the workforce. Therestructuring charge amounted to $910,000, which includes the direct termination benefits, along with the related fringe benefits, non-cash write-downs to realizable value of certain assets, and other charges.

Following is a summary of the restructuring charges and reserves:

November 1999 
June 2000 
September 2000 
Total 
Restructuring charges
$ 935,627 
$ - 
$ - 
$ 935,627 
Paid or charged
(224,357)
- 
- 
(224,357)
Balance January 1, 2000
711,270 
- 
- 
711,270 
Restructuring charges
- 
300,000 
910,000 
1,210,000 
Paid or charged - Direct termination benefits
and related fringe benefits
(711,270)
(300,000)
(460,000)
(1,471,270)
Paid or charged - write-down of assets
- 
- 
(300,000)
(300,000)
Paid or charged - other
- 
- 
(150,000)
(150,000)
Balance December 30, 2000
$ - 
$ - 
$ - 
$ - 
Interest expense increased by $2,196,000 in 2000. This increase is the result of increased levels of borrowings during the year, coupled with higher interest rates.
**Fiscal 1999 Versus Fiscal 1998

The year ending for 1999 had two distinct events that had not occurred in prior years in addition to the charge for restructuring. The conversion to new operating and distribution systems was made at the end of March 1999. This conversionresulted in higher expenses for training and consulting along with significant inefficiencies in the distribution operations. In September 1999, Hurricane Floyd hit eastern North Carolina and essentially resulted in no shipments to customers for a periodof over two weeks. This resulted in additional expenses in distribution, cancellation of orders and a significant increase in allowances.

Net sales for 1999 increased by $2,230,000 or 1.2%. Sales of branded product increased by $29,251,000 to 55.4% of total sales in 1999 from 40.7% in 1998. Increased sales of the Spalding, Nautica, Dickies, and Kaynee brand were the principalcontributors to the increased sales volume. Non branded product sales decreased by $27,021,000.

Gross profit increased by $2,262,000 for 1999. As a percent of sales this represented an increase of 0.9%, from 23.5% in 1998 to 24.4% in 1999. The improvement in the gross profit was due primarily to the increased sales of branded products, whichgenerally have higher margins than non-branded products. However, gross profit was negatively impacted by an increase in allowances of approximately $5,406,000, which was primarily due to late delivery of products resulting from the flood and conversionprocess, and an increase in allowances associated with the increased sales of certain branded products. These events are estimated to represent approximately $2,500,000, $750,000 and $2,100,000, respectively. 

During September, Hurricane Floyd and the resulting flood significantly affected the Company's operations. Beginning a week prior to the arrival of the hurricane, the ports from Miami to Norfolk began to close as the hurricane neared. These closurescaused delays in clearing product through customs. For the two and a half days that Kinston was directly affected by the hurricane no associates could report to work, nor could any product be shipped. Subsequently, Kinston and Eastern North Carolina wereaffected by the worst flooding in recorded history. For approximately one week most roads in and around Kinston were closed, which impacted our associates' ability to come to work and also interrupted both receiving and shipping of product by truckinglines. It is estimated that delays in shipments amounted to approximately $10,000,000 as a direct result of the Hurricane and subsequent flooding.

In April, the Company converted to new operating and distribution systems. This conversion caused delays in shipments to customers, which are estimated to be approximately $8,000,000. Due to inefficiencies experienced in the distribution centers as aresult of the conversion, shipping expenses increased by approximately $2,369,000 in 1999. This increase was primarily the result of additional payroll expenses and consulting fees.

Selling, general and administrative expenses increased by $11,324,000 in 1999, including the increased shipping costs mentioned above. As a percent of sales, there was an increase from 20.2% in 1998 to 25.8% in 1999. Increases in royalty expense of$1,743,000 and advertising expenses of $775,000 were primarily due to the increase in sales of branded product. During 1999, compensation and related fringe benefits increased by approximately $2,620,000, mainly due to additional personnel needed in theconversion of the operating and distribution systems. Freight, amortization (store fixtures and software costs), and outlet store rental expenses increased by $602,000, $506,000 and $312,000, respectively in 1999.

A portion of the Company's corporate office building in New York was leased to third parties. Operations related to this were classified as Rental income - net. 

Other expense was $167,000 in 1999 as compared to income of $57,000 in 1998. This change was primarily due to a loss on the sales of assets in 1999 of $91,000, as compared to a gain of $2,000 in the prior year. 

In November of 1999, the Board of Directors of the Company approved a restructuring plan that resulted in the announcement to close two of the three current domestic sewing factories due to an increasing shift to sales of branded product which wereprimarily imported. This plan also included the elimination of certain positions within the selling and administrative functions of the Company. The restructuring charge amounted to $936,000, which includes only the direct termination benefits along withthe related fringe benefits. This plan resulted in the reduction of approximately 298 full time associates or 30% of the domestic work force at the end of 1999. This plan was completed by the end of the first quarter of 2000. The two properties affectedby this closure were classified as "Assets held for disposal" on the balance sheet and were actively marketed by management. In addition, this plan included the decision to discontinue the ladies sleepwear product line. This product line contributedapproximately $20,314,000 in net sales for 1999 and $23,686,000 in 1998. This product line was primarily private label and was the only ladies offerings by the Company.

Interest expense increased by $686,000 from 1998. This was the result of increased levels of borrowings during the year in order to support higher levels of receivables and inventory.

The effective tax benefit rate was 34% in 1999, as compared to an effective tax rate of 36.7% in 1998. 
**Liquidity and Capital Resources

On October 31, 2000, the Company entered into a new credit facility with Fleet Capital Corporation ("Fleet"), as Agent, ("the Facility"). The Facility provided for a maximum line of credit of $65,000,000, which included both direct borrowingsand letters of credit. The initial proceeds of the Facility were used to repay the outstanding borrowings under the Company's previously existing bank credit facility. 

Direct borrowings bear interest at the London Interbank Offered Rate plus the applicable margin or the Base rate (as defined in the Facility) plus the applicable margin, at the option of the Company. The applicable margin is determined by a ratio ofadjusted E.B.I.T.D.A. to interest expense. Borrowings are collateralized by accounts receivable, inventory and general intangibles of the Company and its subsidiaries. The Facility originally had an expiration of October 2005.

In 2000, Fleet notified the Company that it was in default of the borrowing base limitation covenant contained in the loan agreements. Beginning in January 2001, the Company entered into a number of forbearance agreements with Fleet. The most recentforbearance agreement was amended on April 13, 2001. The total revolver commitment has been reduced to $20,000,000. The agreement allows the Company to borrow funds based on the following formula:
- the lesser of $20,000,000 or the sum of 60% of the value of eligible inventory as determined by Fleet, and 85% of the value of eligible accounts receivable as determined by Fleet

Under no circumstances can the total of direct borrowings plus outstanding letters of credit exceed the total revolver commitment. Additionally, the loan does not permit letters of credit to be issued with expiration dates beyond June 30, 2001. Thecurrent forbearance agreement expires May 25, 2001. 

While the Company has successfully negotiated several extensions to the forbearance agreement in the past, there can be no assurances that Hampton will be able to continue to negotiate acceptable forbearance agreements. Furthermore, the Company hastraditionally financed much of its overseas purchases by issuing letters of credit. 

Outstanding borrowings amounted to $29,647,000 at December 30, 2000 as compared to $35,000,000 at the same time in 1999. Net working capital at December 30, 2000 was $8,327,000 as compared to $43,997,000 in 1999. The working capital ratio as ofDecember 30, 2000 was 1:2 as compared to 1.9**:**1 at the same time in 1999. On April 6, 2001, borrowings under this agreement were $17,725,000; after accounting for various reserves placed on the account by Fleet, availability under the formula was $18,529,000, and excess availability on theline was $804,000. Borrowings on April 6, 2000 were $44,050,000. 

The Facility contains financial covenants relating to minimum levels of net income, interest coverage and capital expenditures and does not allow for the payment of cash dividends. The Company is not required to maintain compensating balances,however, it is required to pay a fee of .25% to .375%, dependent on the ratio of E.B.I.T.D.A. to interest expense, per annum on the unused portion of the total facility plus certain other administrative costs. The Company is currently in default of thefinancial covenants of the Facility. 

Under current conditions, the Company is not able to obtain sufficient funding from its lenders, or from any other source, in order to continue operations on more than a short-term basis. Accordingly, following the termination of the forbearanceperiod, or the expiration thereof without extension, there is substantial doubt as to whether the Company will be able to continue as a going concern.

The Company has been unable to cure the events of default which have occurred under the Facility, and is currently unable to obtain sufficient financing from its lenders, or from any other source, to continue operations on more than a short term basisprimarily due to the following factors:
- During fiscal 2000, the Company's gross profit decreased by approximately $22,700,000 as compared to the previous year. As a percentage of sales this represented a decrease of 11.1% from 24.4% in 1999 to 13.3% in 2000. The Company's total loss forfiscal 2000 was approximately $30,600,000. 
- The Company remains subject to increasing competitive pressures which have had, and are likely to continue to have, a material adverse impact on its profit margins, including consolidations among retailers, a trend towards self-sourcing by largeretailers, an increased level of chargebacks by, and other demands from, retailers. 
- The Company has not been able to identify a business model which it believes will be profitable in light of the competitive pressures the Company currently faces, as well as the liquidity constraints the Company is currently experiencing.

At a special meeting of the Board of Directors held on April 11, 2001, in light of the foregoing factors, the Board of Directors determined that it should consider all strategic alternatives available to the Company at the present time, including apossible sale of all or some portion of the Company's assets. 

In the event the Company is presented with an offer for the sale of all or some portion of its assets, the Board of Directors believes that it is essential to maximizing shareholder value that the Board of Directors be able to authorize the completionof any such sale or sales quickly, without the requirement of obtaining further shareholder approval. Accordingly, under the Sale of Assets Plan for which the Company is seeking shareholder approval, the Board of Directors will be able to approve a saleor sale of assets by the Company without the requirement of obtaining further shareholder approval. 

On April 26, 2001, the Company intends to file a preliminary proxy statement with the Securities and Exchange Commission with respect to a special meeting of shareholders to consider a proposal to approve the Sale of Assets Plan. A completedescription of the Sale of Assets Plan is set forth in the preliminary proxy materials as filed with the Securities and Exchange Commission.

As of April 3, 2001 the Company has entered into an agreement to sell the New York sales office for $15,500,000 subject to the assumption of the mortgage by the buyer. The anticipated closing is expected to occur on May 15, 2001. After fees, taxes andexpenses the Company anticipates receiving net liquidity of $3,500,000. 
**Impact of Inflation

General inflation in the economy has increased operating expenses of most businesses. The Company has provided compensation increases generally in line with the inflation rate and incurred higher prices for materials, goods and services. TheCompany continually seeks methods of reducing cost and streamlining operations while maximizing efficiency through improved internal operating procedures and controls. While the Company is subject to inflation as described above, management believes thatinflation currently does not have a material effect on the Company's operating results, but there can be no assurance that this will continue to be so in the future.
**New Financial Accounting Standards
*Derivative Instruments and Hedging Activities - Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative Instruments and Hedging Activities", is effective for all fiscal years beginning after June 15,2000. SFAS 133 as amended, establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts and for hedging activities. Under SFAS 133, certain contracts that were not formerlyconsidered derivatives may now meet the definition of a derivative. The Company will adopt SFAS 133 effective December 31, 2000. Management expects the adoption of SFAS 133 to have no effect on the financial position, results of operations, or cash flowsof the Company.

In November 1999, the SEC issued *Staff Accounting Bulletin (SAB) 101, "Revenue Recognition*". This Bulletin sets forth the SEC Staff's position regarding the point at which it is appropriate for a Registrant to recognize revenue. The Staffbelieves that revenue is realizable and earned when all of the following criteria are met:
- Persuasive evidence of an arrangement exists; 
- Delivery has occurred or service has been rendered; 
- The seller's price to the buyer is fixed or determinable; and 
- Collectibility is reasonably assured.

The Company uses the above criteria to determine whether revenue can be recognized, and therefore believes that the issuance of this Bulletin has no effect on these financial statements.
**Forward-Looking Statements

This report contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934 under the caption "Management's Discussion and Analysis of Financial Condition and Results ofOperation" and elsewhere in this report.  These forward-looking statements include, among others, statements about the following:
the Company's consideration of strategic alternatives;

the sufficiency of capital to continue operations;

the willingness of the Company's lenders to continue to forbear from exercising their right to require repayment of outstanding indebtedness;

the Company's ability, following approval of the Sale of Assets Plan, to find qualified buyers for its assets;

the Company's ability, after implementation of the Sale of Assets Plan, to repay its indebtedness;

the availability of any distributions to shareholders after a sale of all or substantially all of the Company's assets;

anticipated capital expenditures during 2001; and

the effect of the Sale of Assets Plan on the Company's ability to retain key employees.

The Company intends such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995, and is including this statement forpurposes of invoking these safe harbor provisions.  These statements can be identified from the use of the words "may," "will," "should," "expect," "plan," "intend," "anticipate," "could," "believe," "estimate," "predict," "objective," "potential," "projection," "forecast," "goal," "project," "anticipate," "target" andsimilar expressions.

	Such forward-looking statements involve known and unknown risks, uncertainties and other important factors that could cause the Company's actual results, performance or achievements, or industry results, to differ materially fromthe Company's expectations of future results, performance or achievements expressed or implied by such forward-looking statements.  Factors that may cause such difference include, but are not limited to, the following:
the Company's ability to sell its assets;

the willingness of the Company's lenders to continue to forbear from exercising their right to require repayment of outstanding indebtedness;

the adverse effects on the Company's business of competitive pressures and general economic conditions;

the availability of sufficient capital to continue operations and pay debts;

the risk that certain creditors may require the Company to file for bankruptcy protection; and

the risks set forth in the Company's filings with the Securities and Exchange Commission.

Although the Company believes that the expectations reflected in any forward-looking statements are reasonable, it cannot guarantee future events or results.  Except as may be required under federal law, the Company undertakes no obligation to updatepublicly any forward-looking statements for any reason, even if new information becomes available or other events occur.  In addition, the Company's past results of operations do not necessarily indicate its future results.
**ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK**
Market risk represents the risk of loss that may impact the financial position, results of operations or cash flows of the Company due to adverse changes in financial rates. The Company is exposed to market risk in the area of interest rates. Thisexposure is directly related to borrowing activities under the Credit Facility. The Company does not maintain any interest rate hedging arrangements due to the reasonable risk that near-term interest rates will not rise significantly.
**ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

INDEPENDENT AUDITORS' REPORT

To the Board of Directors and Stockholders of Hampton Industries, Inc.:

We have audited the accompanying consolidated balance sheets of Hampton Industries, Inc. and subsidiaries as of December 30, 2000 and January 1, 2000, and the related consolidated statements of operations, stockholders' equity and cash flows for eachof the three years in the period ended December 30, 2000. Our audits also included the financial statement schedule listed in the index at Item 14 (a)(2). These consolidated financial statements are the responsibility of the Company's management. Ourresponsibility is to express (or disclaim) an opinion on these financial statements and the financial statement schedule based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform our audit to obtain reasonable assurance about whether the financial statements are freeof material misstatement. An audit includes examining on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made bymanagement, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our report.

In our opinion, the consolidated balance sheet as of January 1, 2000, and the related consolidated statements of operations, stockholders' equity and cash flows for each of the two years in the period ended January 1, 2000 present fairly, in allmaterial respects, the consolidated financial position of Hampton Industries, Inc. and subsidiaries as of January 1, 2000, and the results of its operations and its cash flows for the two years in the period ended January 1, 2000, in conformity withaccounting principles generally accepted in the United States of America. Also, in our opinion, the financial statement schedule for the two years in the period ended January 1, 2000, when considered in relation to the basic consolidated financialstatements for such period taken as a whole, presents fairly, in all material respects, the information set forth therein.

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As described in Note B to the consolidated financial statements, the Company's recurring losses from operations, defaultof certain financial covenants and borrowing base limitations under its senior credit facility, and the Company's plan to sell all or a portion of the Company's assets raise substantial doubt about its ability to continue as a going concern. Management'splans concerning these matters are also described in Note B. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Because of the possible material effects of the uncertainty referred to in the preceding paragraph, we are unable to express, and we do not express an opinion on the consolidated financial statements andthe financialstatement schedule for the year ended December 30, 2000.

 

 

March 28, 2001 (except with respect to Note H and O, as to which the date is April 13, 2001)New York, New York
**HAMPTON INDUSTRIES, INC. AND SUBSIDIARIESCONSOLIDATED BALANCE SHEETS**

December 30, 2000 
January 1, 2000 **ASSETS
Current assets:
Cash
$ 364,727 
$ 627,179 
Accounts receivable, less reserves for doubtful accounts
  and allowances of $1,539,505 and $4,501,000 in 2000 and
  1999, respectively
26,484,257 
32,229,509 
Inventories 
25,203,751 
54,714,782 
Income tax receivable 
- 
1,181,132 
Deferred income tax assets 
- 
3,048,718 
Other current assets
446,089 
848,335 
Assets held for disposal - net
7,673,282 
- 
Total current assets
60,172,106 
92,649,655 
Fixed assets - net 
12,176,554 
18,901,529 
Assets held for disposal ' net
- 
1,842,389 
Investments in and advances to unconsolidated affiliates
260,235 
711,084 
Other assets 
4,023,356 
4,030,178 
$ 76,632,251 
$ 118,134,835 **LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable - banks and current maturities of long-term debt
$ 40,655,668 
$ 35,269,433 
Uncleared checks
1,369,113 
2,910,146 
Accounts payable
6,441,747 
5,996,976 
Accrued liabilities
3,378,870 
4,408,308 
Income tax payable
- 
67,480 
Total current liabilities
51,845,398 
48,652,343 
Deferred income tax liabilities
- 
2,721,283 
Long-term debt
220,046 
11,201,058 
Retirement plan obligations
3,620,358 
3,975,382 
55,685,802 
66,550,066 
Stockholders' equity 
Common stock, $1 par value - authorized 10,000,000
Shares; issued 6,286,418
6,286,418 
6,286,418 
Additional paid-in capital
39,148,350 
39,148,350 
(Deficit) retained earnings
(19,610,975)
11,027,345 
25,823,793 
56,462,113 
Less cost of common stock held in treasury - 733,045 shares
4,877,344 
4,877,344 
Total stockholders' equity
20,946,449 
51,584,769 
$ 76,632,251 
$ 118,134,835 **See notes to consolidated financial statements**HAMPTON INDUSTRIES, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF OPERATIONS**

YEAR ENDED
December 30, 2000
January 1, 2000
December 26, 1998
Net sales
$ 182,440,006 
$ 192,560,527 
$ 190,330,346 
Cost of products sold 
158,194,988 
145,623,169 
145,654,492 
Gross margin
24,245,018 
46,937,358 
44,675,854 
Selling, general and administrative
47,770,057 
49,711,314 
38,387,710 
Equity in earnings of unconsolidated affiliates
(21,093)
(88,721)
(103,355)
Restructuring charge
1,210,000 
935,627 
- 
Operating (loss) income
(24,713,946)
(3,620,862)
6,391,499 
Other (income) expense:
Rental income- net
(845,310)
(923,467)
(929,210)
Loss on disposal of fixed assets
167,101 
90,980 
1,751 
Other (income) loss - net
(203,586)
167,286 
(56,748)
Interest expense
6,441,898 
4,245,548 
3,559,961 
5,560,103 
3,580,347 
2,575,754 
(Loss) earnings before provision for (benefit of) income tax
(30,274,049)
(7,201,209)
3,815,745 
Provision for (benefit of) income tax
364,271 
(2,445,000)
1,400,000 
Net (loss) earnings
$ (30,638,320)
$ (4,756,209)
$ 2,415,745 
Basic (loss) earnings per common share
$ (5.52)
$ (0.86)
$ 0.44 
Weighted average common shares outstanding
5,553,374 
5,553,374 
5,552,313 
Diluted (loss) earnings per share**
$ (5.52)
$ (0.86)
$ 0.43 
Weighted average common shares outstanding and other
potential common shares**
5,553,374 
5,553,374 
5,645,724 
*53 Weeks
**Potential common shares have been excluded for 2000 and 1999 because they are anti-dilutive.**See notes to consolidated financial statements.**HAMPTON INDUSTRIES, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY**

Retained
Total
Common Stock
Additional
earnings
Treasury stock at cost
Stockholders'
Shares
Amount
paid-in capital
(deficit)
Shares
Amount
Equity
Balance: December 27, 1997
5,192,254 
$ 5,192,254 
$ 34,022,873 
$ 19,569,698 
(605,825)
$(4,877,344)
$ 53,907,481 
Stock options exercised
3,450 
3,450 
16,058 
- 
- 
- 
19,508 
Stock dividend
519,365 
519,365 
3,181,111 
(3,701,545)
(60,581)
- 
(1,069)
Net earnings
- 
- 
- 
2,415,746 
- 
- 
2,415,746 
Balance: December 28, 1998
5,715,069 
5,715,069 
37,220,042 
18,283,899 
(666,406)
(4,877,344)
56,341,666 
Stock dividend
571,349 
571,349 
1,928,308 
(2,500,345)
(66,639)
- 
(688)
Net loss*
- 
- 
- 
(4,756,209)
- 
- 
(4,756,209)
Balance: January 1, 2000
6,286,418 
6,286,418 
39,148,350 
11,027,345 
(733,045)
(4,877,344)
51,584,769 
Net loss
- 
- 
- 
(30,638,320)
- 
- 
(30,638,320)
Balance: December 30, 2000
6,286,418 
$ 6,286,418 
$ 39,148,350 
$ (19,610,975)
(733,045)
$(4,877,344)
$ 20,946,449 
*53 Weeks**See notes to consolidated financial statements** 

 

 

**HAMPTON INDUSTRIES, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWS
YEAR ENDED
December 30, 2000 
January 1, 2000* 
December 26, 1998 
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) earnings
$ (30,638,320)
$ (4,756,209)
$ 2,415,745 
Adjustments to reconcile net (loss) earnings to net cash
provided by (used in) operating activities:
Amortization
936,590 
888,338 
806,538 
Depreciation
2,477,823 
2,513,303 
2,007,424 
Deferred income tax
327,435 
(1,368,289)
449,206 
Reserves for doubtful accounts and allowances
(2,764,495)
2,113,000 
192,000 
Retirement plan obligations
(355,024)
(13,465)
75,367 
Loss on sale of fixed assets
167,101 
90,980 
1,751 
Equity in earnings of unconsolidated affiliates
(21,093)
(88,721)
(103,355)
Changes in operating assets and operating liabilities:
Accounts receivable
8,509,747 
(2,019,554)
(8,201,128)
Inventories 
29,511,031 
(19,121,311)
(5,236,474)
Income tax receivable
1,181,132 
(1,181,132)
- 
Other current assets
402,245 
96,618 
(430,649)
Uncleared checks
(1,541,033)
799,997 
765,926 
Accounts payable
444,770 
(167,461)
1,866,552 
Accrued liabilities
(1,029,438)
837,246 
(131,711)
Income tax payable
(67,480)
67,480 
(68,346)
NET CASH PROVIDED BY (USED IN) OPERATIONS:
7,540,991 
(21,309,180)
(5,591,154)
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to fixed assets
(3,182,100)
(287,076)
(1,702,924)
Additions to software
(606,596)
(1,447,183)
(2,099,073)
Additions to building
(146,543)
(1,084,231)
- 
Proceeds received from sale of fixed assets
2,184,398 
74,898 
669,802 
Decrease in investments in and advances to 
unconsolidated subsidiaries
471,942 
139,020 
45,126 
Increase in other assets
(929,768)
(2,815,508)
(236,093)
NET CASH USED IN INVESTING ACITVITIES:
(2,208,667)
(5,420,080)
(3,323,162)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net changes in debt - Credit Facility
(5,361,320)
20,300,356 
9,599,640 
Additions - Mortgage
- 
11,000,000 
- 
Payments on debt - Long-term debt
(233,456)
(4,226,292)
(593,332)
Exercise of stock options
- 
- 
18,439 
NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES:
(5,594,776)
27,074,064 
9,024,747 
(DECREASE) INCREASE IN CASH
(262,452)
344,804 
110,431 
CASH - BEGINNING OF PERIOD
627,179 
282,375 
171,944 
CASH - END OF PERIOD
$ 364,727 
$ 627,179 
$ 282,375 
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid during the period
- Interest
$ 5,329,426 
$ 4,032,530 
$ 3,222,788 
- Income tax
$ 110,354 
$ 2,122,610 
$ 1,248,650 
NON-CASH ACTIVITIES:
Acquisition of property and equipment through capital leases
$ - 
$ 170,908 
$ 407,623 
Reclassification of property to current asset (1)
$ 7,673,282 
$ - 
$ - 
*53 Weeks
(1) Subsequent to year-end 2000, the Company reclassified its property located in New York from fixed assets to current assets. The net carrying value of this property was $7,673,282, and was comprised of original costs of$12,271,495 and accumulated depreciation of $5,048,213.**See notes to consolidated financial statements.** 

HAMPTON INDUSTRIES, INC. AND SUBSIDIARIES***************************************************