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, 1997
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 $0.33 1/3 per share:
1,056,191 shares outstanding as of
October 14, 1997
HOWARD B. WOLF, INC.
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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 periods ended August 31, 1997 and
August 31, 1996 (Unaudited).................. 3
Consolidated Balance Sheets
August 31, 1997 (Unaudited) and May 31, 1997 4
Consolidated Statements of Cash Flows for the
three-month periods ended August 31, 1997
and August 31, 1996 (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 1. FINANCIAL INFORMATION
Item 1. Financial Statement
HOWARD B. WOLF, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
(Unaudited)
Three Months Ended
August 31,
1997 1996
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Net sales $3,680,093 $3,630,878
Cost and expenses:
Cost of sales 2,381,043 2,412,723
Selling, general and
administrative expenses 1,026,994 949,568
Provision for
bad debt expense 22,500 22,500
Income from operations 249,556 246,087
Other income 15,539 14,419
Interest income 10,135 7,215
Interest expense (9,770) (8,671)
Income before federal
income tax 265,460 259,050
Provision for federal
income tax (95,264) (92,336)
Net income 170,196 166,714
Retained earnings -
beginning of period 5,369,844 5,074,237
Cash dividends (84,495) (84,495)
Retained earnings -
end of period $5,455,545 $5,156,456
Average number of
shares outstanding 1,056,191 1,056,191
Net income per share $.16 $.16
Cash dividends per share $.08 $.08
See notes to consolidated financial statements.
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HOWARD B. WOLF, INC.
CONSOLIDATED BALANCE SHEETS
ASSETS
August 31, May 31,
1997 1997
(Unaudited) (Audited)
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Current assets:
Cash and cash equivalents $1,587,963 $1,921,415
Accounts receivable (net) 2,379,835 2,415,244
Inventories 3,742,670 3,815,653
Prepaid expenses 204,023 160,994
Deferred federal income tax
benefit 223,000 214,000
Total current assets 8,137,491 8,527,306
Property, plant and equipment 2,388,490 2,360,038
Less accumulated depreciation
and amortization (1,431,205) (1,389,205)
957,285 970,833
Property, plant and equipment
not used in operations,less
accumulated depreciation 2,718 2,718
Other assets 51,097 51,097
$9,148,591 $9,551,954
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and
accrued liabilities $1,192,584 $1,772,987
Federal income tax payable 131,974 40,635
Total current liabilities 1,324,558 1,813,622
Deferred federal income tax 74,000 74,000
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 5,455,545 5,369,844
Less common stock in treasury,
at cost, 25,000 shares (100,000) (100,000)
7,750,033 7,664,332
$9,148,591 $ 9,551,954
Note: The consolidated balance sheet at May 31, 1997 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,
1997 1996
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Cash flows from operating activities:
Net income $ 170,196 $ 166,714
Adjustments to reconcile net income to net cash
provided by operating activities--
Depreciation and amortization 42,000 39,000
Provision for losses on accounts
receivable 22,500 22,500
Changes in deferred federal income tax (9,000) (59,000)
Net changes in operating assets and liabilities--
Accounts receivable 12,910 (234,486)
Inventories 72,983 234,366
Prepaid expenses (43,030) 35,446
Accounts payable and accrued liabilities (580,403) (410,891)
Federal income tax payable 91,339 125,014
Net cash used in operating activities (220,505) (81,337)
Cash flow from investing activities:
Additions to property, plant and equipment (28,452) (34,037)
Net cash used in investing activities (28,452) (34,037)
Cash flows from financing activities:
Cash dividends paid (84,495) (84,495)
Net cash used in financing activities (84,495) (84,495)
Net decrease in cash and cash equivalents (333,452) (199,869)
Cash and cash equivalents at beginning of
period 1,921,415 1,261,987
Cash and cash equivalents at end of period $ 1,587,963 $ 1,062,118
See notes to consolidated financial statements.
</TABLE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
The consolidated balance sheet as of August 31, 1997, the consolidated
statements of operations and the consolidated statements of cash flows
for the three - month periods ended August 31, 1997 and 1996 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 August 31, 1997 and
1996 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, 1997 annual report to shareholders. The results of operations
for the three-month period ended August 31, 1997 are not necessarily
indicative of the operating results for the full year ending May 31, 1998.
<PAGE>
August 31, 1997 May 31, 1997
(Unaudited) (Audited)
Cash and cash equivalents consist of:
Cash $ 1,121,155 $ 945,759
Money market funds 229,225 400,162
Matured funds at factor 237,583 575,494
$1,587,963 $1,921,415
Allowances for collection
losses and discounts are:
Collection losses $ 115,021 $ 116,228
Discounts 18,027 15,703
$ 133,048 $ 131,931
Inventories consist of:
Raw materials $ 1,001,440 $ 1,237,574
Work-in-process 966,367 1,043,457
Finished goods 1,774,863 1,534,622
$ 3,742,670 $ 3,815,653
Accumulated depreciation on
property, plant and equipment
not used in operations is: $ 134,287 $ 134,287
Accounts payable and accrued
liabilities consist of:
Accounts payable - trade $ 862,610 $ 1,241,286
Accrued compensation 181,910 410,148
Accrued taxes 116,957 76,795
Other accrued liabilities 31,107 44,758
$ 1,192,584 $ 1,772,987
Provision for federal income
tax detail is:
Current tax expense $ 104,264 $ 411,491
Deferred tax benefit (9,000) (41,000)
$ 95,264 $ 370,491
Cash flow information:
Cash payments for interest $ 9,770 $ 29,675
Cash payments for
federal income taxes $ 12,925 $ 351,854
<PAGE>
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
LIQUIDITY AND CAPITAL RESOURCES
Working capital at August 31, 1997 was $6,812,933, an increase of
$99,249 from May 31, l997. Cash and cash equivalents decreased
approximately seventeen percent during the three-month period ended
August 31, 1997. Cash was used to fund normal working capital
requirements, including aquisition of property, plant and equipment
additions, payment of dividends and payment of matured accounts
payable and accrued liabilities. Accounts receivable decreased
approximately one percent primarily due to the timing of
shipments during the quarter. Inventories decreased approximately
two percent. Accounts payable and accrued liabilities decreased
approximately thirty-two percent primarily due to payment of normal
maturities and accrued expenses during the three-month period.
The current ratio at August 31, 1997 is 6 to 1 (5 to 1 at May 31,
1997). Total liabilities to assets equals fifteen percent (twenty
percent at May 31, 1997).
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 $28,452
during the three-month period ended August 31, 1997. It is
estimated that approximately $170,000 additional capital
expenditures will be made over the next three quarters, consisting
primarily of equipment, improvements to existing facilities and
outlet mall store fixtures and leasehold improvements. Funding
will come from cash flows generated through operating activities.
No significant disposition of equipment occurred during the three-
month period ended August 31, 1997.
<PAGE>
The Company does not offer a retirement plan nor offer post
retirement or employment benefits. Accordingly, there will be no
impact on th 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, 1997 first quarter net sales increased approximately one
percent compared to the first quarter of the previous year. The
increase resulted primarily from a slightly stronger product
demand.
Cost of sales, as a percentage relationship to net sales, decreased
approximately one and eight-tenths of one percentage point from the
first quarter last year. The percentage decrease resulted
primarily from slightly lower raw material costs and a more
favorable product sales mix.
Selling, general and administrative expenses increased
approximately one and eight-tenths of one percentage point as a
relationship to net sales compared to last year's first quarter.
The percentage increase resulted primarily from higher sales and
marketing expenses. The provision for bad debt expense was $22,500,
the same as for 1996.
Other income increasd approximately eight percent from the first
quarter last year, resulting primarily from rental income from
property not used in operations.
Interest income increased approximately forty percent compared to
the first quarter of the previous year due primarily to higher
average cash balances.
Interest expense, compared to last year's first quarter, was
approximately thirteen percent higher. The increase resulted
primarily from factor interest charges on recourse accounts
receivable.
The federal income tax provision effective tax rate of thirty five
and nine tenths (35.9) percent differs from the statutory rate of
thirty four (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-offs.
<PAGE>
Part II. OTHER INFORMATION
Item 9. No reports on Form 8-K were filed during the three-month
period ended August 31, 1997.
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.
/s/ Eugene K. Friesen
Eugene K. Friesen
Senior Vice President and Treasurer
(Chief Accounting Officer)
/s/ Howard B. Wolf
Howard B. Wolf
Chairman of the Board
October 14, 1997<PAGE>
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