HOSIERY CORP.’S LOSS BLAMED ON IPO COSTS
Byline: Jennifer Owens
WASHINGTON — Mail-order manufacturer Hosiery Corp. of America posted a $4.3 million loss in 1996, and blamed it on costs of an initial public offering and a planned acquisition, neither of which was completed.
The results are spelled out in a filing with the Securities & Exchange Commission.
Preparing for the IPO cost Hosiery Corp. a $23 million noncash charge last year when its board of directors decided in June to offer stock options to its 33 shareholders at below-market prices, the filing stated.
The planned IPO and acquisition cost Hosiery Corp. an additional $1.6 million.
Arthur C. Hughes, vice president and chief financial officer, would not reveal the name of the company Hosiery Corp. had hoped to acquire last year, saying agreements between the companies keep such specifics confidential.
Without the additional costs, the Bensalem, Pa., firm said its profits would have increased 55 percent, from $7.5 million in 1995 to $11.6 million in 1996. Sales rose 19.4 percent in 1996 to $162.8 million from $136.3 million.
According to the filing, the sales increase was due primarily to the company’s push into the United Kingdom last year, which began in January and generated $8.8 million in revenue during 1996.
The company plans to enter France and Germany on a test basis during 1997, and is eyeing Japan for possible expansion.
Hosiery Corp. warned in its filing, however, that “the overall women’s sheer hosiery market may be declining as a result of the high cost of repeat purchases…and changes in women’s choices in business and leisurewear.”
For Hosiery Corp., another pitfall may come from the Federal Trade Commission and 13 states, all of which reviewed the company’s promotional materials this year.
This isn’t the first time the FTC has inquired about Hosiery Corp.’s mail-order materials: In 1984, an FTC lawsuit resulted in an injunction establishing specific rules for the company.
This January, nine states collectively proposed more changes, including revisions in the firm’s promotional disclosures regarding initial and future shipments and a requirement that refunds be given in certain circumstances.
Through its “continuous product shipment” program, specially priced introductory hosiery offers are mailed to potential customers. Those who accept receive additional shipments on a regular basis once they pay for the previous one.
In response to both the states and the FTC, Hosiery Corp. said its has changed its promotional materials, “which, based on experience to date, will have a material adverse effect on its domestic response rates.” According to the filing, the changes have not yet been approved by either the FTC or the states.
Hosiery Corp. markets Silkies brand hosiery, priced from $2.39 to $4.79. Last year, 93 percent of Hosiery Corp.’s sales came from its control-top products, the filing stated.
Hosiery Corp. produced 54 million pairs of hose in 1996, fulfilling 87 percent of its orders.
During the past seven years, Hosiery Corp. has spent $25 million upgrading its knitting and sewing equipment at its Newland, N.C., factory and can currently produce 61 million pairs annually.