UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended August 31, 1995
Commission file number 1-6775
HOWARD B. WOLF, INC.
(Exact name of registrant as specified in its charter)
Texas 75-0847571
(State of incorporation) (IRS Employer Identification No.)
3809 Parry Avenue, Dallas, Texas 75226-1753
(Address of principal executive offices) (Zip Code)
(214) 823-9941
(Telephone number)
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 was required to file such reports),
and (2) has been subject to such filing requirements for the past 90
days.
YES X . NO .
Common stock, par value $.33-1/3 per share: 1,056,191 shares
outstanding as of October 13, 1995
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INDEX
Page
Number
PART I. FINANCIAL INFORMATIONM
Item 1. Financial Statements
Consolidated Statements of Operations
and Retained Earnings
Three months ended August 31, 1995
and August 31, 1994 (Unaudited) 3
Consolidated Balance Sheets
August 31, 1995 (Unaudited) and May 31, 1995 4
Consolidated Statments of Cash Flows
Three months ended August 31, 1995
and August 31, 1994 (Unaudited) 5
Notes to Consolidated Financial Statements
(Unaudited) 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 7 & 8
PART II. OTHER INFORMATION
Item 9. Exhibits and Reports on Form 8-K 9
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Part I. FINANCIAL INFORMATION
Item 1. Financial Statement
HOWARD B. WOLF, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND RETIANED EARNINGS
(Unaudited)
Three Months Ended
August 31,
1995 1994
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Net sales $3,789,539 $3,592,856
Cost and expenses:
Cost of sales 2,537,607 2,363,984
Selling, general and
administrative expenses 903,984 914,754
Provision for bad debt expense 22,500 22,500
3,464,091 3,301,238
325,448 291,618
Other income 9,832 23,266
Interest income 2,209 9,682
Interest expense (11,907) (6,999)
Income before federal income tax 325,582 317,567
Provision for federal income tax (114,395) (111,203)
Net income 211,187 206,364
Retained earnings - beginning of year 4,540,170 4,067,839
Cash dividends (84,495) (73,933)
Retained earnings - end of year $4,666,862 $4,200,270
Average number of shares outstanding 1,056,191 1,056,191
Net income per share $0.20 $0.20
Cash dividends per share $0.08 $0.07
See notes to consolidated financial statements.
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HOWARD B. WOLF, INC.
August 31, May 31,
1995 1995
ASSETS
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(Unaudited)
Current assets:
Cash and cash equivalents $ 969,871 $1,375,569
Accounts receivable (net) 1,953,889 1,984,284
Inventories 3,999,000 4,024,860
Prepaid expenses 130,265 106,630
Deferred federal income tax benefit 182,000 183,000
Total current assets 7,235,025 7,674,343
Property, plant and equipment 2,270,521 2,113,701
Less accumulated
depreciation and amortization (1,188,133) (1,155,133)
1,082,388 958,568
Property, plant and equipment
not used in operations,
less accumulated depreciation 109,009 114,288
Other assets 48,835 48,835
$8,475,257 $8,796,034
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $1,092,256 $1,277,763
Accrued compensation 146,024 155,739
Accrued taxes 78,350 56,449
Other accrued liabilities 95,984 363,769
Federal income tax payable 20,293 25,656
Total current liabilities 1,432,907 1,879,376
Deferred federal income tax 81,000 82,000
Shareholders' equity:
Common stock, par value $.33-1/3;
3,000,000 shares authorized,
1,081,191 shares issued 360,400 360,400
Additional paid-in capital 2,034,088 2,034,088
Retained earnings 4,666,862 4,540,170
Less common stock in treasury,
at cost, 25,000 shares (100,000) (100,000)
6,961,350 6,834,658
$8,475,257 $8,796,034
Note: The consolidated balance sheet at May 31, 1995 has been taken from the
audited financial statements.
See notes to consolidated financial statements.
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HOWARD B. WOLF, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended
August 31,
1995 1994
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Cash flows from operating activities:
Net income $211,187 $206,364
Adustments to reconcile net income to net
cash provided by operating activities--
Depreciation and amortization 38,279 32,280
Provision for losses on accounts receivable 22,500 22,500
Decrease in deferred federal income tax credit (1,000) -
Net changes in assets and liabilities
(Increase) decrease in accounts receivable 7,895 (389,698)
Decrease in inventories 25,860 32,995
(Increase) decrease in prepaid expenses (23,635) 22,170
Decrease in accounts payable
and accrued liabilities (441,106) (645,977)
(Increase) decrease in deferred
federal income tax benefit 1,000 (9,500)
Increase (decrease) in federal
income tax payable (5,363) 117,893
Net cash used in operating activities (164,383) (610,973)
Cash flow from investing activities:
Additions to property, plant and euqipment (156,820) (70,625)
Net cash used in investing activities (156,820) (70,625)
Cash flow from financing activities:
Cash dividends paid (84,495) (73,933)
Net cash used in financing activities (84,495) (73,933)
Net decrease in
cash and cash equivalents (405,698) (755,531)
Cash and cash equivalents
at beginning of period 1,375,569 1,790,060
Cash and cash equivalents
at end of period $ 969,871 $1,034,529
See notes to consolidated financial statements.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
The consolidated balance sheet as of August 31, 1995 the consolidated statements
of operations and the consolidated statements of cash flows for the three-month
periods ended August 31, 1995 and 1994 have been prepared by the Company without
audit. In the opinion of management, all adjustments (which include only normal
recurring adjustments) necessary to present fairly the financial position,
results of operations and changes in cash flows at August 31, 1995 and 1994 have
been made.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted. It is suggested that these consolidated
financial statement be read in conjunction with the financial statements and
notes thereto included in the Company's May 31, 1995 annual report to
shareholders. The results of operations for the three-month period ended August
31, 1995 are not necessarily indicative of the operating results for the full
year ending May 31, 1996.
August 31, 1995 May 31, 1995
Cash and cash equivalents consist of:
Cash $ 890,355 $ 412,670
Money market funds 79,516 134,075
Matured funds at factor - 828,824
$ 969,871 $ 1,375,569
Allowances for collection
losses and discounts are:
Collection losses $ 102,734 $ 88,128
Discounts 9,800 9,682
$ 112,534 $ 97,810
Inventories consist of:
Raw materials $1,479,490 $ 1,381,292
Work-in-process 752,050 984,509
Finished goods 1,767,460 1,659,059
$3,999,000 $ 4,024,860
Accumulated depreciation on
property, plant and equipment
not used in operations is: $ 352,425 $ 347,146
Provision for federal income
tax detail is:
Current tax expense $ 114,395 $ 479,758
Deferred tax benefit - 49,000
$ 114,395 $ 430,758
Cash flow information:
Cash payments for interest $ 11,907 $ 32,161
Cash payments for
federal income taxes $ 119,758 $ 460,000
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Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
LIQUIDITY AND CAPITAL RESOURCES
Working capital at August 31, 1995 was $5,802,118, an increase of $7,157 from
May 31, 1995. Cash and cash equivalents decreased $405,698 during the three-
month period ended August 31, 1995. Cash was used to fund normal working
capital requirements, including acquisition of property, plant and equipment
additions, payment of dividends and payment of matured accounts payable and
accrued liabilities. Accounts receivable increased $30,395 primarily due to the
timing of shipments during the quarter. Inventories decreased $25,860, or
approximately one percent. Accounts payable and accrued liabilities decreased
$441,106 primarily due to payment of normal maturities and accrued expenses
during the three-month period.
The current ratio at August 31, 1995 is 5 to 1 (4 to 1 at May 31, 1995). Total
liabilities to assets equals eighteen percent (twenty-two percent at May 31,
1995).
The Company factors its accounts receivable with a commercial factor on a
matured basis. (Funds are remitted by the factor upon maturity of the invoices,
plus a set number of collection days). The factor establishes a credit line per
customer on a non-recourse basis. Credit extended by the company in excess of
the credit line is factored on a recourse basis.
Capital acquisition and improvement expenditures totaled $156,820 during the
three-month period ended August 31, 1995. It is estimated that approximately
$100,000 additional capital expenditures will be made over the next three
quarters, consisting primarily of equipment and improvements to existing
facilities. Funding will come from cash flows generated through operating
activities. No significant disposition of equipment occurred during the three-
month period ended August 31, 1995. It is expected that the Dallas facility
shown as property, plant and equipment not used in operations will be
sold for approximately $250,000 during the next three-month period.
The Company does not offer a retirement plan nor offer post retirement or
employment benefits. Accordingly, there will be no impact on the Company due to
SFAS 106, "Employers' Accounting for Postretirement Benefits Other Than
Pensions" and SFAS 112, "Employers' Accounting for Post Employment Benefits".
Based on current operations and internally generated cash flows, management
believes that adequate resources will be available to meet current and future
liquidity requirements.
RESULTS OF OPERATIONS
August 31, 1995 first quarter net sales increased approximately five and one-
half percent compared to the first quarter of the previous year. The increase
resulted primarily from a slightly stronger product demand and a broadened
market base.
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Cost of sales, as a percentage relationship to net sales, increased
approximately one and two-tenths of one percentage point from the first quarter
last year. The percentage increase resulted primarily from higher manufacturing
costs and sales allowances.
Selling, general and administrative expenses decreased approximately one-and
seven-tenths of one percentage point as a percentage relationship to net sales
compared to last year's first quarter. The percentage decrease resulted
primarily from higher net sales. The provision for bad debt expense was
$22,500, the same as 1994.
Other income decreased approximately fifty-eight percent from the first quarter
last year, resulting primarily from a decrease in rental income from property
not used in operations.
Interest income decreased approximately seventy-seven percent compared to the
first quarter of the previous year due primarily to lower average cash balances.
Interest expense, compared to last year's first quarter, was approximately
seventy percent higher. The increase resulted primarily from higher factor
interest charges on recourse accounts receivable.
The federal income tax provision effective tax rate of 35.1 percent differs from
the statutory rate (34 percent) as a result of nondeductible life insurance
premiums, nondeductible portion of meals, accelerated depreciation,
capitalization of certain expenses in inventories and the difference between the
doubtful account reserve and writeoff,
Part II. OTHER INFORMATION
Item 9. No reports on Form 8-K were filed during the three-month period ended
August 31, 1995.
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.
HOWARD B. WOLF, INC.
Eugene K. Friesen /s
Eugene K. Friesen
Senior Vice-President and Treasurer
Howard B. Wolf /s
Howard B. Wolf
Chairman
October 13, 1995
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