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 February 29, 1996
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 $.033-1/3 per share:
1,056,191 shares outstanding as of
April 10, 1996
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INDEX
Page
Number
Part 1. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Statements of
operations and Retained Earnings for the
three-month and six-month periods ended
February 29, 1996 and February 28, 1995 ( Unaudited) 3
Consolidated Balance Sheets
February 29, 1996 (Unaudited) and May 31, 1995 4
Consolidated Statements of Cash Flows for the
nine-month period ended February 29, 1996
and February 28, 1995 (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 8
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Part I. FINANCIAL INFORMATION
Item 1. Financial Statement
HOWARD B. WOLF, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
(Unaudited)
Three Months Ended
February 29, February 28,
1996 1995
<S> <C> <C>
Net sales $3,753 $3,708
Cost and expenses:
Cost of sales 2,440 2,402
Selling, general and
administrative expenses 984 985
Provision for bad debt expense 13 13
3,437 3,399
316 309
Gain on sale of property, plant
and equipment not used in operations - -
Other income 11 22
Interest income 8 6
Interest expense (11) (14)
Income before federal income tax 324 323
Federal income
tax provision (113) (113)
Net income 211 210
Retained earnings -
beginning of period 4,919 4,349
Cash dividends (84) (84)
Retained earnings - end of period $5,045 $4,475
Average number of shares outstanding 1,056 1,056
Net income per share $0.20 $0.20
Cash dividends per share $0.08 $0.08
See notes to consolidated financial statements.
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<TABLE>
HOWARD B. WOLF, INC
CONSOLIDATED STATEMENT OF OPERATIONS AND RETAINED EARNINGS
(Unaudited)
Nine Months Ended
February 29, February 28,
1996 1995
<S> <C> <C>
Net sales $11,418 $10,971
Cost and expenses:
Cost of sales 7,343 7,065
Selling, general and
administrative expenses 3,010 2,933
Provision for bad debt expense 58 58
10,410 10,055
1,008 917
Gain on sale of property, plant
and equipment not used in operations 144 -
Other income 38 71
Interest income 15 24
Interest expense (39) (26)
Income before federal income tax 1,167 985
Federal income tax provision (408) (346)
Net income 759 639
Retained earnings -
beginning of period 4,540 4,068
Cash dividends (253) (232)
Retained earnings - end of period $5,045 $4,475
Average number of shares outstanding 1,056 1,056
Net income per share $0.72 $0.61
Cash Dividends paid per share $0.24 $0.22
See notes to consolidated financial statements.
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<TABLE>
HOWARD B. WOLF, INC.
CONSOLIDATED BALANCE SHEETS
February 29, May 31,
1996 1995
ASSETS (Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $1,110 $1,376
Accounts receivable (net) 1,883 1,984
Inventories 4,131 4,025
Prepaid expenses 159 107
Deferred federal income tax benefit 237 183
Total current assets 7,520 7,674
Property, plant and equipment 2,372 2,114
Less accumulated
depreciation and amortization (1,254) (1,155)
1,118 959
Property, plant and equipment
not used in operations,
less accumulated depreciation - 114
Other assets 49 49
$8,687 $8,796
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 820 $1,278
Accrued compensation 121 156
Accrued taxes 17 56
Other accrued liabilities 239 364
Federal income tax payable 71 26
Total current liabilities 1,268 1,879
Deferred federal income tax 79 82
Shareholders' equity:
Common stock, par value $.33-1/3;
3,000,000 shares authorized,
1,081,191 shares issued 360 360
Additional paid-in capital 2,034 2,034
Retained earnings 5,045 4,540
Less common stock in treasury,
at cost, 25,000 shares (100) (100)
7,340 6,835
$8,687 $8,796
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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<TABLE>
HOWARD B. WOLF, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Ended
Increase (decrease) in cash) February 29, February 28,
1996 1995
<S> <C> <C>
Cash flows from operating activities:
Net income $ 759 $ 639
Adjustments to reconcile net income to
net cash (used in) provided by
operating activities --
Depreciation and amortization 113 92
Provision for losses
on accounts receivable 58 58
Decrease in federal
income tax credit (3) (3)
Gain on sale of property,
plant and equipment
not used in operations (144) -
Net changes in
operating assets and liabilities-
Accounts receivable 44 (257)
Inventories (106) 38
Prepaid expenses (52) (21)
Accounts payable and
accrued liabilities (662) (828)
Federal income tax benefit (54) (24)
Federal income tax payable 45 10
Net cash used in
operating activities (3) (295)
Cash flows from investing activities:
Additions to property,
plant and equipment 259 (166)
Sale of property,
plant and equipment
not used in operations 250 -
Net cash used in
investing activities (9) (166)
Cash flows from financing activities:
Cash dividends paid (253) (232)
Net cash used in
financing activities (253) (232)
Net change in
cash and cash equivalents (265) (693)
Cash and cash equivalents
at beginning of period 1,376 1,790
Cash and cash equivalents
at end of period $1,110 $1,097
See notes to consolidated financial statements.
</TABLE>
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
The consolidated balance sheet as of February 29, 1996, the consolidated
statements of operations and the consolidated statements of cash flows for
the three-month and nine-month periods ended February 29, 1996 and February
28, 1995 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 as of and for the periods ended February 29, 1996 and
February 28, 1995 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 statements 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 nine-month period
ended February 29, 1996 are not necessarily indicative of the operating
results for the full year ending May 31, 1996.
February 29, 1996 May 31, 1995
Cash and cash equivalents consist of:
Cash $ 191 $ 413
Money market funds 919 134
Matured funds at factor - 829
$1,110 $1,376
Allowances for collection
losses and discounts are:
Collection losses $ 102 $ 88
Discounts 16 10
$ 118 $ 98
Inventories consist of:
Raw materials $1,309 $1,381
Work-in-process 955 985
Finished goods 1,867 1,659
$4,131 $4,025
Accumulated depreciation on
property, plant and equipment
not used in operations is: $ 137 $ 347
Provision for federal income
tax detail is:
Current tax expense $ 465 $ 480
Deferred tax benefit (57) (49)
$ 408 $ 431
Cash flow information:
Cash payments for interest $ 39 $ 32
Cash payments for
federal income taxes $ 540 $ 460
<PAGE>
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
LIQUIDITY AND CAPITAL RESOURCES
Working capital at February 29, 1996 was $6,251,944, an increase of $456,977
from May 31, 1995. Cash and cash equivalents decreased $265,449 during the
nine-month period ended February 29, 1996. 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 decreased $101,395
primarily due to the timing of shipments during the quarter. Inventories
increased $106,248 primarily to meet increased sales. Accounts payable and
accrued liabilities decreased $656,822 primarily due to payment of normal
maturities and accrued expenses during the nine-month period.
The current ratio at February 29, 1996 is 6 to 1 (4 to 1 at May 31, 1995).
Total liabilities to assets equals sixteen 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
($1,017,000) at February 29, 1996-$614,000 at May 31, 1995).
Capital acquisition and improvement expenditures totaled $258,595 during the
nine-month period ended February 29, 1996. It is estimated that approximately
$25,000 additional capital expenditures will be made during the fourth
quarter, 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
nine-month period ended February 29, 1996, and none is planned during the
next fourth quarter. In November 1995 a building, carried in the balance
sheet as property, plant and equipment not used in operations was sold for
$250,000 from which a gain of $95,154 after taxes was realized.
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.
<PAGE>
RESULTS OF OPERATIONS
Net sales for the third and nine-month periods ended February 29, 1996
increased approximately one and two-tenths of one percent and four and one-
tenth of one percent, respectively,in each period compared to the 1995 third
quarter and nine-month periods. Net sales for the third quarter ended
February 29,1996 decreased approximately three and two-tenths of one percent
from the preceding second quarter. The increases and decreases resulted
primarily from a slightly stronger product demand and a broadened market base
and changes in product sales mix.
Cost of sales, as a percentage relationship to net sales for the third
quarter ended February 29, 1996, increased approximately two-tenths of one
percent over the third quarter ended February 28, 1995 and approximately four
percent over over the preceding second quarter ended November 30, 1995. For
the nine-month period ended February 29, 1996, the cost of sales percentage
relationship to net sales decreased approximately one-tenth of one percent
compared to the 1995 six-month period. The percentage changes resulted
primarily from a change in product sales mix.
Selling, general and administrative expenses for the three-month and nine-
month periods ended February 29,1996, as a percentage relationship to net
sales, decreased approximately three-tenths of one percent and four-tenths
of one percent, respectively, compared to the 1995 three-month and nine-month
periods. Selling, general and administrative expenses, as a percentage
relationship to net sales, were approximately two and seven tenths of one
percent lower in the 1996 third quarter compared to the second quarter. The
percentage decreases resulted primarily from slightly lower selling and
general expenses. The provision for bad debt expense was $57,500, in the
1996 and 1995 nine-month periods.
Other income in the 1996 three-month and nine-month periods decreased
approximately fifty-two percent and forty-six percent, respectively, in both
periods over the 1995 comparable periods. Other income decreased
approximately forty percent in the 1996 third quarter compared to the 1996
second quarter. The decrease resulted primarily from rental income from
property not used in operations.
Interest income in the three-month period ended February 29, 1996 increased
approximately forty-one percent and decreased approximately thirty-seven
percent in the nine-month period ended February 29, 1996, compared to the
same periods in 1995. Interest income increased approximately sixty-three
percent in the 1996 third quarter compared to the 1996 second quarter. The
changes are primarily due to changes in average cash balances.
Interest expense decreased approximately twenty-five percent for the three-
month period ended February 29, 1996 and increased approximately forty-six
percent for the nine-month period ended February 29, 1996, compared to the
same periods in 1995. Interest expense in the 1996 third quarter decreased
approximately thirty-five percent from the 1996 second quarter. The changes
resulted primarily from factor interest costs on recourse accounts receivable
balances.
The federal income tax provision effective tax rate of 35 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 write-off.
Part II. OTHER INFORMATION
Item 9. No reports on Form 8-K were filed during the three-month period
ended February 29, 1996.
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
(Principal Accounting Officer)
Howard B. Wolf /s
Howard B. Wolf
Chairman
April 12, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
unaudited
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<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAY-31-1996
<PERIOD-END> FEB-29-1996
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</TABLE>
