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Exhibit index appears
on page
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended Commission File Number
September 3, 1995 I-5960
CONCORD FABRICS INC.
(Exact name of Registrant as specified in its charter)
Delaware 13-5673758
(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
1359 Broadway, New York, New York 10018
(Address of principal executive (Zip Code)
offices)
Registrant's telephone number, including area code (212) 760-0300
Securities registered pursuant to Section 12(b) of the Act:
<TABLE>
<CAPTION>
Name of each exchange
Title of each Class on which registered
- ---------------------------------- -------------------
<S> <C>
Class A Common Stock, par value $.50 per Share American Stock Exchange
Class B Common Stock, par value $.50 per Share American Stock Exchange
</TABLE>
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 was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
------- -------
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 Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K.
Yes No X
------- -------
As of November 20, 1995, 2,105,611 shares of Registrant's Class A Common Stock
and 1,509,451 shares of Registrant's Class B Common Stock were outstanding, and
the aggregate market value of the voting stock held by non-affiliates of
Registrant was $2,654,711.
DOCUMENTS INCORPORATED BY REFERENCE
Definitive Proxy Statement for the Annual Meeting of Shareholders to be
held on January 9, 1996, filed pursuant to Section 14 of the Securities Exchange
Act of 1934, incorporated by reference into Part III hereof.
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PART I
Item 1. Business
Registrant's principal business is developing, designing and producing,
in its own facilities and through unaffiliated contractors, woven and knitted
fabrics of natural and synthetic fibers in a wide variety of colors and
patterns, for sale to manufacturers (primarily of women's apparel) and to
retailers (including chains, department stores and independently owned fabric
stores) for resale to the home sewing market. In the fiscal year ended September
3, 1995 ("fiscal 1995") 68% of Registrant's fabric sales was to manufacturers
and 32% was to retail stores. In the fiscal year ended August 28, 1994 ("fiscal
1994") 71% of Registrant's fabric sales was to manufacturers and 29% was to
retail stores.
Manufacture and Sale of Fabrics
Woven Fabrics
Woven fabrics accounted for 69% of fabric sales in fiscal 1995, compared
with 70% in fiscal 1994 and 72% in fiscal 1993. All of Registrant's supply of
unfinished woven fabrics ("greige goods") are made from natural and/or synthetic
fibers by unaffiliated companies, who frequently produce the greige goods to
Registrant's specifications. In fiscal 1995, Registrant was able to obtain
adequate supplies of greige goods at competitive prices. Registrant purchased
substantially all of its greige goods from about 85 suppliers; the five largest
suppliers accounted for 36% of Registrant's purchases of greige goods and the
largest supplied 13%. In fiscal 1994, Registrant purchased substantially all of
its greige goods from about 100 suppliers; the five largest suppliers accounted
for 37% of Registrant's purchases of greige goods and the single largest
supplied 11%. In fiscal 1993, Registrant purchased its greige goods from about
105 suppliers of which the single largest supplied 12%
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of Registrant's needs. Registrant's greige cloth purchases derive from domestic
and imported sources.
Greige goods purchased by Registrant are printed or dyed and finished by
unaffiliated finishers in accordance with Registrant's specifications, or until
October, 1995, by Registrant in its Washington, Georgia plant. On October 6,
1995 the Washington Plant was closed (See Item 2. Properties). In fiscal 1995,
Registrant contracted with about 10 finishers for the finishing or printing of
woven fabrics; the largest contract finisher accounted for 36% of Registrant's
woven finishing requirements; no other contract finisher accounted for more than
11%. In fiscal 1995, Registrant's Washington Georgia plant accounted for 18% of
Registrant's finishing requirements. Registrant has not experienced difficulties
in finding outside sources to convert its solid fabrics now that its Washington
Plant is closed.
Registrant's woven fabrics are sold primarily by its own staff of
salesmen and to a lesser extent by independent sales agents. Sales are made
primarily to manufacturers of budget and moderate priced women's apparel, and to
a lesser extent, to retailers for resale to the home sewing market, to
manufacturers of men's wear and to the home furnishing industry.
In April, 1994, Registrant acquired Kat-Em International, Inc., an
importer of finished printed and dyed woven fabrics (see Note N to Financial
Statements). This wholly owned subsidiary merchandises and sells these fabrics
to apparel manufacturers headquartered in the United States; some of the fabric
is shipped into the United States and some is shipped to its customers' offshore
manufacturing locations. Kat-Em International, Inc.'s sales, from the date of
its acquisition, represented less than 6% of Registrant's consolidated sales in
fiscal, 1994. In fiscal 1995 Kat-Em's sales were almost 13% of Registrant's
consolidated sales.
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In fiscal 1995, Kat-Em International Inc, purchased fabric from
approximately 50 suppliers, the largest of which provided 25% of its
requirements.
Registrant exports printed and solid woven fabrics for sale abroad. In
fiscal 1995 exports accounted for almost 8% of sales. In fiscal 1994 exports
were almost 7% of sales and in fiscal 1993 exports were almost 6% Registrant's
consolidated sales.
Prior to each "season" (i.e., spring-summer, fall-winter), Registrant's
woven fabrics are designed by Registrant's design staff to meet current and
developing styles that Registrant believes will be fashionable. Thus, the demand
for Registrant's woven fabrics during any season depends in part upon
Registrant's ability to forecast changes in styles and fashion and react
thereto. Registrant often maintains a variety of greige and finished goods at
necessary inventory levels to meet changing demand for its woven fabrics.
Knitted Fabrics
Knitted fabrics accounted for 31% of fabric sales in fiscal 1995,
compared with 30% in fiscal 1994 and 28% in fiscal 1993. Registrant purchases
yarn for knitting from unaffiliated suppliers; in fiscal 1995, Registrant
purchased yarn from 13 suppliers, the three largest suppliers accounted for 76%
of Registrant's purchases of yarn; the largest of which accounted for 48% of
yarn purchases. In fiscal 1994 Registrant purchased yarn from 19 suppliers; the
three largest of which supplied 63% of Registrant's needs. Registrant is
presently able to obtain adequate supplies of yarn at competitive prices and
does not believe it is dependent on any single supplier.
In fiscal 1995, 88% of the yarn purchased by Registrant was knitted into
fabric at Registrant's Milledgeville, Georgia facility. The balance of the yarn
purchased by Registrant in 1995 was knitted by unaffiliated contractors. In
Fiscal 1994, 72% of yarn purchased by Registrant was knitted at
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Milledgeville. In the previous fiscal year, almost all of the yarn purchased by
Registrant was knitted into fabric in Registrant's Milledgeville, Georgia plant.
In the past three years, all of the knitted fabric was dyed and finished in
Registrant's Milledgeville and Washington facilities (see Item 2. Properties).
Registrant generally produces knitted fabrics against orders received in
advance of production. As a result, Registrant's knitted fabrics are generally
not styled with a view to anticipating fashion trends. Knitted fabrics are sold
by Registrant's salesmen and by independent sales agents, primarily to
manufacturers of budget and moderately priced women's apparel.
Certain Factors Affecting Registrant's Business
General
Registrant's sales and earnings in any fiscal year are strongly
influenced by various factors -- the public's acceptance of and demand for
Registrant's fabrics and designs and the general state of economic conditions in
the textile and apparel industry. In periods of rising raw material prices
Registrant may encounter difficulty in passing such increases on to its
customers; in periods of falling prices Registrant's inventory and commitment
positions can result in significant reductions in gross margins. In addition,
Registrant's earnings may be adversely affected by price changes in the greige
goods market in the event and to the extent that management does not anticipate
the direction and timing of such price changes. Registrant's management attempts
to balance spot market purchases with forward commitments so as to minimize this
risk.
In fiscal 1993, Registrant's ability to obtain significantly higher
gross margins on some of its product lines more than offset a slight decline in
sales volume and resulted in then record earnings. In fiscal 1994 continuing
high gross margins were again principally responsible for record operating
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earnings. In fiscal 1995, reduced demand for fabrics marketed to apparel
manufacturers coupled with lower margins for certain product ranges and the
provision for loss for the disposal of Washington, Georgia plant resulted in an
operating loss.
The amount of apparel being imported into the United States,
particularly from low labor cost regions, is another factor which affects the
textile and apparel industry and may significantly adversely affect Registrant's
future sales and earnings. Registrant's acquisition in 1994 of Kat-Em, to the
extent that its customers include manufacturers with offshore operations, was
made in part to counter the possible adverse effects of apparel and textile
imports. To date Kat-Em has been unprofitable. The NAFTA (North American Free
Trade Act) became effective in fiscal 1994, but to date Registrant cannot assess
the adverse effect of its implementation. Similarly, The General Agreement on
Tariffs and Trade (GATT) may adversely affect Registrant's business by
facilitating imports.
See Part II, Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations for more information concerning Registrant's
sales and results of operations in fiscal 1995 and 1994.
Seasonal Fluctuations
Prior to fiscal 1989, Registrant experienced a traditional seasonal
sales pattern, with sales highest from December through March, although sales
tended lower as the year progressed. Subsequent thereto, much of the seasonality
in Registrant's business has been mitigated due to a combination of growth in
Registrant's sales to retail stores which are less subject to seasonality and an
increase in the production of customer orders in Registrant's own manufacturing
facilities.
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Customers, Employees and Competition
In fiscal 1995, Registrant sold its fabric products to approximately
4,100 customers, the 20 largest of which accounted for 27% of sales; the largest
customer, a retail chain store, accounted for approximately 3% of sales.
Registrant sells on credit terms standard in the industry. Registrant sells its
fabrics throughout the United States, but its principal sales markets for
apparel fabrics are the New York metropolitan area and to a lesser extent
California and its neighboring states. Registrant's home sewing fabric sales are
not concentrated in any regional market.
Registrant employs approximately 435 persons. Registrant's employees are
not represented by a union. In fiscal 1995, approximately 35 of Registrant's
employees were engaged in activities relating to development of new or improved
fabrics and designs. Registrant spent approximately $5,800,000 on such
activities in fiscal 1995 and approximately $4,600,000 on such activities in
fiscal 1994 and $3,600,000 in fiscal 1993. Registrant does not hold any
significant patents or licenses, but does have copyrights on print patterns that
it develops. Registrant protects its copyrights and actively pursues infringers.
Registrant licenses the rights to use certain of its patterns and receives
royalty payments thereon. Registrant also purchases designs for its printed
fabrics from unaffiliated designers.
Many firms, no one of which is dominant, are in competition with
Registrant; competition is based primarily on price, product, quality and
service. Registrant is in competition both with converters -- whose function is
limited to the conversion of greige goods and yarn into finished fabrics -- and
with integrated textile companies which manufacture, as well as convert, greige
goods and yarns. Since Registrant operates its knitting plant in Milledgeville,
Georgia, Registrant is not solely a converter. However, it is not a fully
integrated producer since it does not weave greige goods or spin yarn, does not
print woven or knit greige goods and did not dye and
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finish all of its woven greige goods. Registrant contracts out all its print
requirements with unaffiliated producers. Since Registrant closed its
Washington, Georgia Plant in October, 1995, it now contracts out all of its
solid woven dyeing and finishing. Registrant believes that it is one of the
larger firms whose primary business is converting, but there are a number of
integrated firms with which Registrant competes that have significantly larger
sales, financial, and other resources than Registrant.
Item 2. Properties
Registrant owns a 23 1/2-year-old knitting and finishing plant,
consisting of approximately 130,000 square feet on one floor, situated on
approximately 60 acres of land in Milledgeville, Georgia. The plant generally
operates at full productive capacity, which is adequate for Registrant's
requirements.
Registrant, in fiscal 1986, purchased a 140,000-square foot building on
approximately 55 acres of land in Washington, Georgia. On October 6, 1995
Registrant closed this facility and it is currently being offered for sale. See
Part I, Item 1. Business for more information concerning this location.
Registrant, in fiscal 1987, purchased a 93,000-square foot building on
approximately three acres of land in Chino, California. In February, 1994
Registrant sold the machinery and equipment in that facility, and leased the
building to a non-affiliated contract dyeing and finishing company for a five
year term. See Part I, Item 1. Business and Management's Discussion and Analysis
for more information concerning this location.
Registrant's Washington facility was closed because Registrant could not
secure sufficient business at acceptable margins to adequately fill its
capacity.
Registrant believes that its Milledgeville, Georgia facility will
provide substantially all of its knitting and dyeing and finishing of knitted
fabrics requirements.
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Registrant has entered into leases expiring in 2003 for two floors at
1359 Broadway, New York, New York, consisting of approximately 40,000 square
feet which it uses for its executive offices and showrooms. Kat-Em
International, Inc. has a lease for office and warehouse space in Los Angeles,
California comprised of 40,000 square feet; the lease expires in 1999. (See Note
H of Notes to Financial Statements).
Item 3. Legal Proceedings
None.
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable.
Executive Officers of Registrant
The following table shows the executive officers of Registrant, their
respective ages, and all positions presently held with Registrant by each such
person.
Name Age Position
- ---- --- --------
Alvin Weinstein 70 Chairman of the Board and Director
Frank Weinstein 65 Vice Chairman of the Board and Director
Earl Kramer 62 President and Director
Martin Wolfson 59 Senior Vice President, Treasurer and Director
Mark Neugeboren 45 Vice President
Joan Weinstein 63 Secretary
Alvin Weinstein has been Chairman of the Board of Registrant since 1969.
Frank Weinstein has been Vice Chairman of the Board since 1979. Alvin and Frank
Weinstein are brothers.
Mr. Kramer joined Registrant in June 1972 as President of its Knit
Division, with responsibility for supervising and coordinating the various
aspects of Registrant's knit operations. In March 1976, Mr. Kramer was
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elected a Vice President of Registrant and was given the additional executive
responsibility of supervising the operation of Registrant's dyeing and finishing
plant in Washington, Georgia. Mr. Kramer has served as President of Registrant
since August 1979.
Mr. Wolfson was elected Senior Vice President in 1995 after having been
Vice President since 1981 and Treasurer and a Director of Registrant since 1973.
Formerly he had served as Controller of Registrant. He served as Secretary of
Registrant from January 1973 to October 1981. Mr. Wolfson is the principal
financial officer of Registrant.
In January 1985, Mr. Neugeboren was elected a Vice President in Charge
of Production. Mr. Neugeboren joined Registrant in 1972 and has held various
positions in its production departments.
In October 1982, Joan Weinstein (the wife of Alvin Weinstein) was
elected Secretary of Registrant. She has been Registrant's Fashion Director
since joining Registrant in 1973.
All of Registrant's officers hold office until the next annual meeting
of Registrant's Board of Directors (scheduled for January 9, 1996) and the
election of their successors.
PART II
Item 5. Market for the Registrant's Common Stock and Related Security
Holder Matters
On May 27, 1988 Registrant exchanged one share each of Class A and
Class B stock of Concord Fabrics Inc. (a Delaware Corporation) for each share of
stock previously issued of Concord Fabrics Inc. (a New York Corporation). As of
September 3, 1995, the number of record holders of the Registrant's Class A
Common Stock was 400 and the number of record holders of Registrant's Class B
Common Stock was 374. The principal market on which both classes of
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Registrant's Common Stock is traded is the American Stock Exchange. The table
below sets forth information on the high and low sales prices for such Common
Stock for each quarter of fiscal 1995 and 1994.
<TABLE>
<CAPTION>
-------------1995------------ -------------1994--------------
Fiscal Quarters ---Class A--- ---Class B--- ---Class A--- ---Class B---
Ending On or About High Low High Low High Low High Low
- ------------------ ---- --- ---- --- ---- --- ---- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C>
November 30 9-1/2 7-3/4 9-1/8 7-7/8 8-5/8 6-1/4 8-1/4 6-1/4
February 28 8-3/8 6-3/4 8 6-1/2 10-5/8 8-5/8 10-5/8 8-5/8
May 31 6-7/8 5-3/8 6-1/2 5-1/2 10-5/8 7 10 7
August 31 6-5/8 4-7/8 6-1/2 4-5/8 9-5/8 7-3/8 9-5/8 7-3/8
</TABLE>
Registrant has not paid cash dividends for many years and has no present
intention to do so.
The payment of dividends by Registrant is subject to restrictions under
the terms of the Note Agreement between Registrant and John Hancock Mutual Life
Insurance Company (the "Note Agreement"). Under the Note Agreement, cumulative
payments for cash dividends and redemption of capital stock are limited to
$3,000,000 plus 50% of Consolidated Net Income (as defined) subsequent to August
28, 1994 plus net cash proceeds from the sale of stock; $2,025,000 was available
for such payments as of September 3, 1995.
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ITEM 6 CONCORD FABRICS INC.
AND SUBSIDIARIES
SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
Year Ended
-------------------------------------------------------------------------------
September 3, August 28, August 29, August 30, September 1,
1995 1994 1993 1992 1991
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Net sales $180,152,779 $197,804,544 $197,047,714 $201,727,239 $197,826,710
------------ ------------ ------------ ------------ ------------
Cost of sales 143,950,238 148,920,930 153,338,242 163,328,144 159,661,419
Merchandising expenses 9,644,429 8,698,897 7,758,817 7,395,576 7,646,917
Selling and shipping expenses 13,852,770 14,169,565 12,370,215 12,819,442 13,222,483
General and administrative expenses 12,640,139 13,551,493 11,724,618 11,011,780 11,128,696
Provision for doubtful accounts 633,000 1,321,000 1,777,000 698,000 1,260,000
Interest expense (net) 2,432,438 1,787,311 2,320,021 3,202,091 3,582,006
Plant shut-down costs 1,100,000 3,000,000
Gain on sale of equipment (1,420,606)
------------ ------------ ------------ ------------ ------------
Total 184,253,014 187,028,590 189,288,913 201,455,033 196,501,521
------------ ------------ ------------ ------------ ------------
Earnings (loss) before income taxes and
extraordinary item (4,100,235) 10,775,954 7,758,801 272,206 1,325,189
Income tax provision (credit) (1,414,000) 4,332,000 3,133,000 102,000 542,000
------------ ------------ ------------ ------------ ------------
Net earnings (loss) before extraordinary item (2,686,235) 6,443,954 4,625,801 170,206 783,189
Extraordinary item (net of income tax credit) (297,266)
------------ ------------ ------------ ------------ ------------
NET EARNINGS (LOSS) $ (2,983,501) $ 6,443,954 $ 4,625,801 $ 170,206 $ 783,189
============ ============ ============ ============ ============
Earnings (loss) per share:
Earnings (loss) before extraordinary item $(.75) $1.80 $1.30 $.05 $.22
Extraordinary item (.08)
----- ---- ----- ---- ----
Net earnings (loss) $(.83) $1.80 $1.30 $.05 $.22
===== ===== ===== ==== ====
Average number of shares used in computing
earnings (loss) per share 3,606,976 3,574,780 3,565,062 3,565,062 3,565,062
============= ============= ============= ============= =============
Dividends paid None None None None None
==== ==== ==== ==== ====
Working capital $ 44,625,140 $ 37,845,803 $ 33,385,284 $ 30,462,022 $ 29,711,483
============= ============= ============= ============= =============
Long-term debt (less current portion) $ 20,000,000 $ 7,500,000 $ 9,000,000 $ 10,500,000 $ 12,000,000
============= ============= ============= ============= =============
Total assets $ 76,645,925 $ 84,895,505 $ 74,854,867 $ 76,621,865 $ 81,399,324
============= ============= ============= ============= =============
Stockholders' equity $ 39,777,321 $ 42,723,322 $ 36,166,868 $ 31,541,067 $ 31,370,861
============= ============= ============= ============= =============
Stockholders' equity per share $11.00 $11.86 $10.14 $8.85 $8.80
====== ====== ====== ===== =====
</TABLE>
The year ended September 3, 1995 comprised 53 weeks; the other
years presented each comprised 52 weeks.
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Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Fiscal 1995 vs. Fiscal 1994
Fiscal 1995 comprised 53 weeks; fiscal 1994 comprised 52 weeks. Fiscal
1995 results include the operations of Kat-Em International Inc. for a full
year. Fiscal 1994 results include the operations of Kat-Em from April 18, 1994,
the date it was acquired by Registrant, through August 28, 1994.
Net sales decreased 9% from $197,804,544 to $180,152,779. This resulted
from a decline in unit sales of 8% and a 1% decline in average selling price.
Registrant believes that the decrease in sales reflected decreased consumer
spending on domestically manufactured apparel.
Gross margins fell from 24.7% in fiscal 1994 to 20.1% in fiscal 1995.
This resulted from price competition stemming from reduced consumer demand,
inefficiencies and lack of productivity in Registrant's Washington, Georgia
manufacturing facility (the plant was closed in October, 1995), higher raw
material costs, and inventory mark-downs predominantly in the Kat-Em subsidiary.
Registrant expects that the closing of the Washington plant will lead to lower
sales but higher gross margins in fiscal 1996.
Merchandising expenses increased by approximately $945,000 or 11%. About
$700,000 of this was due to the inclusion of the Kat-Em operation for a full
year in fiscal 1995 versus a four and one half month period in fiscal 1994. The
balance resulted from higher engraving costs associated with the production of
more intricate designs on Registrant's printed fabrics.
Selling and shipping expenses declined about 2% as a result of the
decrease in Registrant's sales. The decrease was less than the actual sales
decrease because some of Registrant's selling and shipping expenses do not vary
directly with sales but represent sales management cost which are more fixed in
nature.
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General and administrative expenses declined almost 7% primarily due to
decreased performance related compensation and profit sharing.
Registrant's provision for doubtful accounts declined from $1,321,000 in
fiscal 1994 to $633,000 in fiscal 1995 because they were no significant customer
failures in contrast with fiscal 1994. However, Registrant is continuously
exposed to bad debt risk with respect to its wholesale customers when such
customers may have significant concentration of business with retailers who may
become financially unstable. Registrant attempts to monitor this situation and
adjust its credit policies accordingly.
Interest expense increased by 36%. In November, 1994 Registrant secured
$20,000,000 of long term financing which replaced $9,000,000 of long term debt
and added to working capital. The additional $11,000,000 of long term borrowing,
although at a lower fixed rate than the debt it replaced in part accounted for
substantially all of the increase in interest cost for the year. Average short
term debt declined by almost $2,000,000 but average short term borrowing rates
were higher in fiscal 1995 so that interest cost on short term debt was
marginally higher.
In fiscal 1995 Registrant incurred a loss of $2,686,000 (net of an
income tax credit of $1,414,000) before an extraordinary item. The loss
principally reflected weak demand for Registrant's imported and domestic woven
fabrics marketed to apparel manufacturers. The loss included $660,000 (net of
tax credit) provision for the shut down of the Washington, Georgia plant. An
extraordinary loss of $297,000 (net of income tax credit of $198,000) in
connection with a penalty incurred on Registrant's early repayment of a term
loan brought the net loss to $2,984,000.
In fiscal 1994 Registrant earned $6,444,000 (net of $4,332,000 income
taxes). The results included an $860,000 after tax gain from the sale of
machinery and equipment.
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Fiscal 1994 vs. Fiscal 1993
Fiscal 1994 and fiscal 1993 comprised 52 weeks.
Fiscal 1994 results include the operations of Kat-Em from April 18, 1994
(the date it was acquired by Registrant).
Net sales increased less than 1% from $197,047,714 to $197,804,544. A
decline in unit sales by approximately 3 1/2% was offset by an increase in
average selling price of about 4%.
Gross margins rose from 22.2% in fiscal 1993 to 24.7% in fiscal 1994
primarily due to a more favorable product mix comprised of proprietary printed
fabric lines and a favorable greige goods market. Increasing greige goods costs
are expected to put pressure on future gross margins and may adversely affect
operating results. However, Registrant believes that the disposition of the
Chino facility will lead to improved operating efficiencies at its Washington,
Georgia plant as its solid woven fabric dyeing and finishing needs are
concentrated there. Accordingly, gross margins for certain of Registrant's
products may improve.
In February, 1994 Registrant sold the operating assets of its Chino,
California plant for $2,000,000 cash and recognized a pre-tax gain of
$1,420,606. Registrant also leased the land and building for a five year period
to the buyer. The lessee has an option to purchase the real estate for
$2,900,000.
Merchandising expenses increased by approximately 8% reflective of
higher costs associated with designing and engraving print patterns and 4% due
to the acquisition of Kat-Em.
Selling and shipping expenses increased by almost 12% as a result of the
payment of higher performance related compensation and 3% due to the acquisition
of Kat-Em.
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General and administrative expenses increased by almost 10% reflective
of higher performance related compensation and 6% due to the acquisition of Kat-
Em.
Registrant's provision for doubtful accounts declined from $1,777,000 in
fiscal, 1993 to $1,321,000 in fiscal, 1994.
Interest expense declined by 23% reflective of lower average short term
borrowing requirements permitted by cash flow generation from earnings and
reduced long term debt as a result of Registrant's scheduled amortization
payment thereon.
In fiscal 1994 Registrant earned $6,444,000 (net of $4,332,000 income
taxes) in fiscal 1993 Registrant earned $4,626,000 (net of $3,133,000 income
taxes). The 1994 results included a pre-tax gain of $1,421,000 ($860,000 after
tax) from the sale of the Chino, California plant's operating assets.
Liquidity and Capital Resources
During fiscal 1995, Registrant met its cash needs from cash flow from
operations ($1,460,000), issuance and sale of notes ($20,000,000) and the sale
of capital stock ($38,000), which it used to invest in plant and equipment
($4,113,000), reduce short term debt ($7,600,000), and repay long term debt
($9,000,000). Cash increased by $785,000. Working capital increased by
$6,779,000.
Under individual credit line arrangements with several New York banks,
Registrant may borrow up to $20,000,000 at the prime lending rate. In addition,
the Registrant has a facility of $5,000,000 for letters of credit in connection
with the operations of Kat-Em. The credit lines are unsecured. Registrant is
generally expected to maintain compensating bank balances. The banks have
advised that Registrant has been in substantial compliance with its compensating
balance arrangements, and that withdrawal of bank balances is not legally
restricted. Amounts borrowed are generally due in 30 to 90 days. Although the
lending arrangements are informal and are cancelable at each
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bank's option, Registrant has no reason to believe that the lines of credit will
not be available during fiscal 1996. Registrant's actual borrowing fluctuates
from month to month. The average outstanding debt during fiscal 1995 was
$9,538,000 and the maximum outstanding at any time during the year was
$18,000,000. $2,000,00 was outstanding at September 3, 1995. Registrant expects
its lines of credit, together with cash management and cash flow from
operations, to be adequate to finance operations for fiscal 1996.
Registrant's long-term lending agreement with an insurance company which
is unsecured, prohibits pledging of assets, and requires (among other things -
See Note G to Financial Statements) maintenance of minimum working capital,
tangible net worth of $36,166,868 and maintenance of a minimum working capital
ratio of 1.5 to 1. The unpaid principal balance is $20,000,000. At September 3,
1995, tangible net worth approximated $39,450,000 and Registrant's working
capital ratio was 3.7 to 1. Registrant has met all of the requirements specified
in the loan agreement. The loan bears interest at 9.31% a year, and is repayable
in seven equal annual installments beginning November, 1998.
Inflation
Registrant's operating costs are subject to the general inflationary
trends of the rest of the economy; in fiscal 1995 such trends were modest;
inflation has not been a significant factor in Registrant's costs for the last
three fiscal years.
<PAGE>
<PAGE>
ITEM 8 CONCORD FABRICS INC.
AND SUBSIDIARIES
- I N D E X -
FINANCIAL STATEMENTS
INDEPENDENT AUDITORS' REPORT
CONSOLIDATED BALANCE SHEET AS AT SEPTEMBER 3, 1995
AND AUGUST 28, 1994
CONSOLIDATED STATEMENT OF OPERATIONS AND RETAINED
EARNINGS FOR THE YEARS ENDED SEPTEMBER 3, 1995,
AUGUST 28, 1994 AND AUGUST 29, 1993
CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEARS
ENDED SEPTEMBER 3, 1995, AUGUST 28, 1994 AND
AUGUST 29, 1993
NOTES TO FINANCIAL STATEMENTS
FINANCIAL STATEMENT SCHEDULE
Schedule II - Valuation and Qualifying Accounts
Schedules other than those referred to above have been omitted as the conditions
requiring their filing are not present or the information has been
presented elsewhere in the financial statements.
<PAGE>
<PAGE>
[LETTERHEAD]
Independent Auditors' Report
To the Board of Directors
and Stockholders
Concord Fabrics Inc.
We have audited the accompanying consolidated balance sheets of Concord
Fabrics Inc. and Subsidiaries as at September 3, 1995 and August 28, 1994, and
the related consolidated statements of operations and retained earnings and cash
flows for each of the three years in the period ended September 3, 1995. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of 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 by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Concord Fabrics Inc. and
Subsidiaries as at September 3, 1995 and August 28, 1994, and the results of its
operations and its cash flows for each of the three years in the period ended
September 3, 1995 in conformity with generally accepted accounting principles.
<PAGE>
<PAGE>
The audits of the financial statements were made for the purpose of forming
an opinion on those statements taken as a whole. The schedule listed in the
index of financial statement schedules is presented for purposes of complying
with the Securities and Exchange Commission's rules and is not part of the basic
financial statements. This schedule has been subjected to the auditing
procedures applied in the audits of the basic financial statements and, in our
opinion, fairly states, in all material respects, the financial data required to
be set forth therein in relation to the basic financial statements taken as a
whole.
EISNER & LUBIN
----------------------------
CERTIFIED PUBLIC ACCOUNTANTS
New York, New York
November 20, 1995
<PAGE>
<PAGE>
CONCORD FABRICS INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
September 3, August 28,
A S S E T S 1995 1994
----------- ------------ -----------
<S> <C> <C>
Current assets:
Cash $ 2,362,119 $ 1,577,382
Accounts receivable (less estimated
doubtful accounts of $1,225,000 in
1995 and $2,175,000 in 1994) 27,909,706 34,999,162
Inventories (Notes A(2) and B) 24,071,426 31,084,560
Income tax refunds receivable 2,051,000
Prepaid expenses and other current
assets 2,352,403 2,556,929
Deferred income taxes
(Note D) 2,172,000 1,923,000
----------- -----------
Total current assets 60,918,654 72,141,033
Property, plant and equipment (at cost,
less depreciation and amortization of
$5,101,597 in 1995 and $6,101,858 in
1994) (Notes A(3) and C) 8,153,913 8,880,287
Property, plant and equipment held
for sale - at estimated disposal
value (Note O) 3,000,000
Property and plant - leased to
others (Note M) 2,193,532 2,345,692
Other assets 2,379,826 1,528,493
----------- -----------
T O T A L $76,645,925 $84,895,505
=========== ===========
</TABLE>
<TABLE>
<CAPTION>
September 3, August 28,
L I A B I L I T I E S 1995 1994
--------------------- ------------ --------
<S> <C> <C>
Current liabilities:
Notes payable - banks (Note E) $ 2,000,000 $ 9,600,000
Notes payable - insurance company
(current portion) (Note G) 1,500,000
Accounts payable 8,923,439 15,190,783
Accrued expenses and taxes 5,370,075 7,011,810
Income taxes (Note D) 992,637
----------- -----------
Total current liabilities 16,293,514 34,295,230
Notes payable - insurance company
(less current portion above) (Note G) 20,000,000 7,500,000
Deferred income taxes (Note D) 214,000 75,000
Other liabilities 361,090 301,953
----------- -----------
Total liabilities 36,868,604 42,172,183
----------- -----------
Commitments and contingencies
(Notes B, F, G, H, K, M, O and Q)
S T O C K H O L D E R S' E Q U I T Y
-------------------------------------
(Notes G, J and K)
Common stock:
Class A - $.50 par value - authorized
4,000,000 shares, issued 2,105,611
shares in 1995 and 2,093,111 shares
in 1994 1,052,805 1,046,555
Class B - $.50 par value - authorized
4,000,000 shares, issued 1,509,451 shares 754,726 754,726
Additional paid-in capital 9,062,885 9,031,635
Retained earnings (statement attached) 28,906,905 31,890,406
----------- -----------
Total stockholders' equity 39,777,321 42,723,322
----------- -----------
T O T A L $76,645,925 $84,895,505
=========== ===========
</TABLE>
The notes to financial statements are made a part hereof.
<PAGE>
<PAGE>
CONCORD FABRICS INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS AND
RETAINED EARNINGS
<TABLE>
<CAPTION>
Y e a r E n d e d
-------------------------------------------------
September 3, August 28, August 29,
1995 1994 1993
-------------- -------------- --------------
<S> <C> <C> <C>
Net sales $180,152,779 $197,804,544 $197,047,714
------------ ------------ ------------
Cost of sales 143,950,238 148,920,930 153,338,242
Merchandising expenses 9,644,429 8,698,897 7,758,817
Selling and shipping expenses 13,852,770 14,169,565 12,370,215
General and administrative expenses 12,640,139 13,551,493 11,724,618
Provision for doubtful accounts 633,000 1,321,000 1,777,000
Interest expense (net) (Note I) 2,432,438 1,787,311 2,320,021
Gain on sale of equipment (Note M) (1,420,606)
Plant shut-down costs (Note O) 1,100,000
------------ ------------ ------------
T o t a l 184,253,014 187,028,590 189,288,913
------------ ------------ ------------
Earnings (loss) before income taxes and
extraordinary item (4,100,235) 10,775,954 7,758,801
Income tax provision (credit) (Note D) (1,414,000) 4,332,000 3,133,000
------------ ------------ ------------
Earnings (loss) before extraordinary item (2,686,235) 6,443,954 4,625,801
Extraordinary item - loss on early extinguishment
of debt (net of income tax credit) (Note G) (297,266)
------------ ------------ ------------
Net earnings (loss) (2,983,501) 6,443,954 4,625,801
Retained earnings - beginning of year 31,890,406 25,446,452 20,820,651
------------ ------------ ------------
RETAINED EARNINGS - END OF YEAR
(TO CONSOLIDATED BALANCE SHEET) $ 28,906,905 $ 31,890,406 $ 25,446,452
============ ============ ============
Earnings (loss) per share (Notes A(4) and K):
Earnings (loss) before extraordinary item $(.75) $1.80 $1.30
Extraordinary item (.08)
----- ----- -----
Net earnings (loss) $(.83) $1.80 $1.30
===== ===== =====
Average number of shares used in computing
earnings (loss) per share 3,606,976 3,574,780 3,565,062
========= ========= =========
</TABLE>
The notes to financial statements are made a part hereof.
<PAGE>
<PAGE>
CONCORD FABRICS INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
Y e a r E n d e d
-----------------------------------------------
September 3, August 28, August 29,
1995 1994 1993
------------- ------------- -------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings (loss) $(2,983,501) $ 6,443,954 $ 4,625,801
Adjustments to reconcile net earnings (loss) to net
cash provided by operating activities:
Depreciation and amortization 1,991,438 1,977,960 1,744,735
Deferred income taxes (110,000) (249,000) 110,000
Provision for doubtful accounts 633,000 1,321,000 1,777,000
Gain on sale of equipment (1,420,606)
Plant shut-down costs 1,100,000
Change in assets and liabilities, net of effects
in 1994 of purchase acquisition:
Decrease (increase) in:
Accounts receivable 6,456,456 1,763,070 (3,222,741)
Inventories 7,013,134 (9,476,448) 4,216,433
Income tax refunds receivable (2,051,000)
Prepaid expenses and other current assets 204,526 37,826 (124,407)
Other assets (851,333) (452,014) (465,227)
Increase (decrease) in:
Accounts payable (6,267,344) 1,919,810 (609,048)
Accrued expenses and taxes (2,741,735) 1,682,556 992,781
Income taxes (992,637) 537,520 (1,111,716)
Other liabilities 59,137 37,928 35,184
----------- ----------- -----------
Net cash provided by operating activities 1,460,141 4,123,556 7,968,795
----------- ----------- -----------
Cash flows from investing activities:
Purchases of property, plant and equipment (4,112,904) (2,914,448) (1,621,231)
Proceeds from sale of equipment 2,000,000
Payment for purchase of Kat-Em International, Inc. (1,150,482)
----------- ----------- -----------
Net cash (used in) investing activities (4,112,904) (2,064,930) (1,621,231)
----------- ----------- -----------
Cash flows from financing activities:
Payment of notes payable - insurance company (9,000,000) (1,500,000) (1,500,000)
Borrowing - insurance company 20,000,000
Payments of notes payable - banks (net) (7,600,000) (1,200,000) (4,200,000)
Issuance of Class A common stock pursuant to
stock options exercised 37,500 112,500
----------- ----------- -----------
Net cash provided by (used in) financing activities 3,437,500 (2,587,500) (5,700,000)
----------- ----------- -----------
NET INCREASE (DECREASE) IN CASH 784,737 (528,874) 647,564
Cash - beginning of year 1,577,382 2,106,256 1,458,692
----------- ----------- -----------
CASH - END OF YEAR $ 2,362,119 $ 1,577,382 $ 2,106,256
=========== =========== ===========
</TABLE>
The notes to financial statements are made a part hereof.
<PAGE>
<PAGE>
CONCORD FABRICS INC.
AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
(Note A) - Summary of Significant
Accounting Policies:
(1) Principles of Consolidation - The financial statements include the
accounts of Concord Fabrics Inc. and its wholly-owned subsidiaries (the
Company); intercompany investments, advances and transactions have been
eliminated (Note N).
(2) Inventories - Inventories are stated at lower of cost or market,
first-in, first-out; obsolete inventory items are carried at net realizable
value. Inventory costs comprise material, direct labor and overhead (Note B).
(3) Property and Depreciation - Property, plant and equipment is recorded
at cost. Profits and losses on dispositions are reflected in current operations.
Fully depreciated assets are written off against accumulated depreciation.
Depreciation for financial accounting purposes is computed
substantially by the straight-line method to amortize the cost of various
classes of assets over their estimated useful lives. Leasehold improvements are
amortized over the shorter of the life of the related asset or the life of the
lease.
For income tax purposes, accelerated methods of depreciation are
generally used; deferred income taxes are provided for the difference between
depreciation expense for financial accounting purposes and for income tax
purposes.
(4) Earnings (loss) Per Share - Earnings (loss) per share is computed by
dividing net earnings by the weighted average number of common shares
outstanding during the year. Outstanding options to purchase common shares (Note
K) did not have a material effect on earnings per share for the years ended
August 28, 1994 and August 29, 1993.
(5) For purposes of the statement of cash flows, the Company considers all
highly liquid debt investments purchased with a maturity of three months or less
to be cash equivalents.
(6) The Company operates on a 52-53 week year ending on the Sunday closest
to August 31. The year ended September 3, 1995 comprised fifty-three weeks; the
other two years in the period ended September 3, 1995 each comprised fifty-two
weeks.
(Continued)
<PAGE>
<PAGE>
CONCORD FABRICS INC.
AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
- Sheet 2 -
(Note B) - Inventories:
Inventories are summarized by categories as follows:
<TABLE>
<CAPTION>
September 3, August 28,
1995 1994
------------ ------------
<S> <C> <C>
Finished goods $12,160,524 $14,295,989
Work-in-process 3,253,096 5,544,442
Greige goods and yarn 8,657,806 11,244,129
------------ ------------
T o t a l $24,071,426 $31,084,560
============ ============
</TABLE>
At September 3, 1995, the Company had outstanding commitments to
purchase greige goods aggregating approximately $6,500,000.
(Note C) - Property, Plant and Equipment:
Property, plant and equipment is summarized as follows:
<TABLE>
<CAPTION>
Estimated
September 3, August 28, Useful Life
1995 1994 (In Years)
------------ ----------- -------------
<S> <C> <C> <C>
Land $ 78,503 $ 171,350
Buildings 2,568,195 4,010,289 19 to 40
Machinery and
equipment 7,628,490 8,453,179 5 to 9
Furniture and
fixtures 1,339,152 1,337,654 3 to 8
Leasehold
improvements 1,641,170 1,009,673 Term of lease or
life of asset
----------- -----------
T o t a l 13,255,510 14,982,145
Less depreciation
and amortization 5,101,597 6,101,858
----------- -----------
N e t $ 8,153,913 $ 8,880,287
=========== ===========
</TABLE>
(Continued)
<PAGE>
<PAGE>
CONCORD FABRICS INC.
AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
- Sheet 3 -
(Note D) - Income Taxes:
(1) Income tax provision (credit) on the consolidated statement of
operations and retained earnings is analyzed as follows:
<TABLE>
<CAPTION>
Y e a r E n d e d
--------------------------------------------
September 3, August 28, August 29,
1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
Currently payable
(refundable):
Federal $(1,304,000) $3,792,000 $2,359,000
State and local 789,000 664,000
Deferred:
Federal 34,000 (205,000) 88,000
State and local (144,000) (44,000) 22,000
----------- ----------- -----------
T o t a l $(1,414,000)* $4,332,000 $3,133,000
=========== =========== ===========
</TABLE>
(2) Income taxes computed at the statutory federal income tax rate are
reconciled to income tax provision (credit) on the consolidated statement of
operations and retained earnings as follows:
<TABLE>
<CAPTION>
Y e a r E n d e d
------------------------------------------------
September 3, August 28, August 29,
1995 1994 1993
------------ ------------ ------------
<S> <C> <C> <C>
Income taxes at statutory
federal income tax rate $(1,364,000) $3,675,000 $2,645,000
Effect of:
State and local income
taxes (net of federal
income taxes) (85,000) 606,000 453,000
Nondeductible expenses 68,000 99,000 67,000
Foreign sales corporation (33,000) (48,000) (32,000)
------------ ------------ ------------
T o t a l $(1,414,000)* $4,332,000 $3,133,000
============ ============ ============
</TABLE>
*The tax benefit related to the extraordinary item on
retirement of debt was $198,000 in the year ended
September 3, 1995.
(Continued)
<PAGE>
<PAGE>
CONCORD FABRICS INC.
AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
- Sheet 4 -
(Note D) - Income Taxes (Continued):
(3) Deferred tax assets and liabilities are comprised of the following
elements:
<TABLE>
<CAPTION>
September 3, August 28,
1995 1994
----------- -----------
<S> <C> <C>
Gross deferred assets:
Excess of tax over financial statement
basis of property and plant leased
to others $ 177,000 $ 179,000
Estimated doubtful accounts 489,000 869,000
Excess of tax over financial statement
basis of inventory 1,027,000 766,000
Accruals deductible for tax purposes
when paid 767,000 409,000
State and other tax loss carryforwards 60,000
----------- -----------
Gross deferred assets 2,520,000 2,223,000
----------- -----------
Gross deferred liabilities:
Excess of financial statement over
tax basis of property, plant and
equipment 406,000 375,000
Excess of financial statement over
tax basis of property, plant and
equipment held for sale 156,000
----------- -----------
Gross deferred liabilities 562,000 375,000
----------- -----------
Net deferred taxes $1,958,000 $1,848,000
=========== ===========
Reflected on attached consolidated balance sheet as:
Current deferred asset - net $2,172,000 $1,923,000
Non-current deferred (liability) - net (214,000) (75,000)
----------- -----------
Net deferred taxes $1,958,000 $1,848,000
=========== ===========
</TABLE>
(4) Concord Fabrics Inc. files a consolidated federal income tax return
with its domestic subsidiary; separate returns are filed for state and local
income tax purposes.
(Continued)
<PAGE>
<PAGE>
CONCORD FABRICS INC.
AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
- Sheet 5 -
(Note E) - Notes Payable - Banks:
(1) The Company has total bank lines of credit aggregating $20,000,000;
$2,000,000 of loans were outstanding at September 3, 1995. Amounts borrowed are
generally due in 30 to 90 days. The line of credit arrangements are informal and
are cancelable at the banks' option and provide for borrowings at the prime
lending rate. The Company is generally expected to maintain average annual
compensating bank balances in consideration of average annual bank borrowings.
The banks have advised that the Company has been in substantial compliance with
its compensating balance arrangements and that withdrawals of bank balances are
not legally restricted. The average interest rates on amounts outstanding were
8.75% and 7.75% at September 3, 1995 and August 28, 1994, respectively.
(2) A subsidiary of the Company had approximately $450,000 of letters of
credit outstanding at September 3, 1995 for merchandise scheduled for future
receipts.
(Note F) - Profit-Sharing Plan:
The Company's noncontributory profit-sharing plan, approved by the
Treasury Department, for the benefit of eligible full time employees, provides
for a minimum annual contribution to a trust fund based on percentages of
pre-tax profits (as defined); the Board of Directors may increase such minimum
annual contribution at its sole discretion but all contributions are limited to
the maximum amount deductible for federal income tax purposes. Contributions of
$500,000 and $420,000 were made for the years ended August 28, 1994 and August
29, 1993, respectively; no contribution was made for the year ended September 3,
1995.
(Note G) - Notes Payable - Insurance
Company:
On November 30, 1994, the Company borrowed $20,000,000 from an
insurance company. The unsecured loan bears interest at 9.31% a year and is
repayable in seven equal annual installments commencing on the fourth
anniversary date of the borrowing. A portion of the loan proceeds was used to
prepay the $9,000,000 loan outstanding to The Prudential Insurance Company of
America. A prepayment penalty of $495,266 was also paid; this amount has been
reflected as an extraordinary item (net of $198,000 income tax benefit) on the
statement of operations and retained earnings for the year ended September 3,
1995.
(Continued)
<PAGE>
<PAGE>
CONCORD FABRICS INC.
AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
- Sheet 6 -
(Note G) - Notes Payable - Insurance
Company (Continued):
The new loan agreement requires maintenance of tangible net worth of
approximately $36,000,000. The Company must also maintain, at each fiscal
quarter end, ratios of current assets to current liabilities and current assets
to total liabilities of not less than 1.5 to 1 and 1.4 to 1, respectively, and
may not permit debt for borrowed money to exceed 55% of capitalization (as
defined). The agreement also prohibits the pledging of assets and restricts
dividends and redemptions of capital stock to $3,000,000 plus 50% of
consolidated net income (as defined) subsequent to August 28, 1994; at September
3, 1995, $2,025,000 was available for such payments.
(Note H) - Leases:
The Company leases showroom and office space and various equipment
under leases expiring at various dates to 2003.
Minimum rental payments under long-term leases in effect at September
3, 1995 are as follows:
<TABLE>
<S> <C>
Year ending in:
1996 $1,542,000
1997 1,133,000
1998 1,069,000
1999 819,000
2000 701,000
Thereafter 1,572,000
----------
T o t a l $6,836,000
==========
</TABLE>
Rent expense aggregated $2,300,000 in 1995, $2,200,000 in 1994 and
$2,380,000 in 1993.
(Continued)
<PAGE>
<PAGE>
CONCORD FABRICS INC.
AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
- Sheet 7 -
(Note I) - Interest Expense:
Interest expense (net) on the consolidated statement of operations and
retained earnings comprises the following:
<TABLE>
<CAPTION>
Y e a r E n d e d
-----------------------------------------
September 3, August 28, August 29,
1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
Interest expense $2,533,640 $1,874,332 $2,365,560
Interest income 101,202 87,021 45,539
----------- ----------- -----------
N e t $2,432,438 $1,787,311 $2,320,021
=========== =========== ===========
</TABLE>
(Note J) - Common Stock:
The Class A and Class B shares principally differ as follows:
(1) The Class A shares have a 15% dividend preference and a 10%
liquidation preference with respect to the Class B shares.
(2) Holders of Class A shares are entitled to one vote a share
whereas holders of Class B shares are entitled to ten votes a share.
(3) Holders of Class A shares, voting as a separate class, are
entitled to elect 25% of the Company's directors and holders of Class B shares,
voting as a separate class, are entitled to elect the remaining directors.
(4) Class B shares are convertible into Class A shares on the
basis of one share of Class A shares for each share of Class B shares; Class A
shares have no conversion rights. During the year ended August 28, 1994, 11,650
Class B shares were converted to an equal number of Class A shares; no
conversions took place during the year ended September 3, 1995.
(Note K) - Stock Options:
Pursuant to an Incentive Program adopted on January 10, 1989, awards
(as defined) may be granted to key employees of the Company up to a maximum of
500,000 shares of the Company's Class A common stock.
(Continued)
<PAGE>
<PAGE>
CONCORD FABRICS INC.
AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
- Sheet 8 -
(Note K) - Stock Options (Continued):
On January 10, 1989, options to purchase an aggregate of 150,000
shares of the Company's Class A common stock at $3 a share (fair market value at
such date) were granted to three employees. The options become exercisable in
four annual installments com- mencing January 10, 1994 and expire ten years from
the date of grant.
On March 1, 1994, an option to purchase 10,000 shares of the Company's
Class A common stock at $9.50 a share (fair market value at such date) was
granted to an employee. The option was cancelled upon the employee's termination
of employment during the year ended September 3, 1995.
Option activity is summarized as follows:
<TABLE>
<CAPTION>
Options Outstanding
------------------------
Shares Available Number of
For Grant Shares Amount
---------------- --------- ----------
<S> <C> <C> <C>
Balance - August 31, 1992
and August 29, 1993 350,000 150,000 $ 450,000
Year ended August 28, 1994:
Granted (10,000) 10,000 95,000
Exercised(2) (37,500) (112,500)
---------- ---------- ----------
Balance - August 28, 1994 340,000 122,500 432,500
Year ended September 3, 1995:
Cancelled(1) 10,000 (10,000) (95,000)
Exercised(2) (12,500) (37,500)
---------- ---------- ----------
Balance - September 3, 1995 350,000 100,000 $ 300,000
========== ========== ==========
</TABLE>
(1) Subsequent to September 3, 1995, 10,045 and 2,455 options
were exercised and cancelled, respectively, by an employee
who retired.
(2) The $31,250 and $93,750 excess of the exercise price over the
par value of the Class A common stock issued has been
credited to additional paid-in capital in the years ending
September 3, 1995 and August 28, 1994, respectively.
(Note L) - Business of the Company:
The Company's principal business is the manufacturing and purchasing
of woven and knitted fabrics for sale to manufacturers (primarily of women's
apparel) and to retailers (including chains, department stores and independently
owned fabric stores) for resale to the home sewing market.
(Continued)
<PAGE>
<PAGE>
CONCORD FABRICS INC.
AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
- Sheet 9 -
(Note M) - Chino, California Facility:
In February 1994, the Company sold its Chino, California machinery and
equipment for $2,000,000 cash and recognized a gain before income taxes of
$1,420,606 on its statement of operations for the year ended August 28, 1994.
The Company also leased the land and building for a five year period at an
annual net rental of $297,000; the lessee was also granted the option to
purchase the land and building during the lease period for $2,900,000.
(Note N) - Acquisition of Kat-Em
International, Inc.
On April 18, 1994, the Company purchased all of the capital stock of
Kat-Em International, Inc. (Kat-Em), an importer of printed and solid finished
fabrics used in the apparel industry, for $1,150,482 cash, which includes
acquisition costs. In connection therewith, the former sole shareholder is being
employed by Kat-Em pursuant to a five year employment contract.
The acquisition was accounted for as a purchase and, accordingly, the
acquired assets and liabilities were recorded at their estimated fair values at
the acquisition date and the operations of Kat-Em are included in the
consolidated statement of operations and retained earnings from April 18, 1994.
(Note O) - Plant Shut-Down Costs:
The Company has decided to dispose of its Washington, Georgia dyeing
and finishing plant and is actively searching for a buyer; manufacturing
operations ceased October 6, 1995. The loss of $1,100,000 (before income tax
benefit of $440,000) reflected on the statement of operations and retained
earnings for the fiscal year ended September 3, 1995 comprises estimated
expenses during the disposition period. The Company estimates that the net
proceeds of sale will approximate the facility's depreciated cost.
(Continued)
<PAGE>
<PAGE>
CONCORD FABRICS INC.
AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
- Sheet 10 -
(Note P) - Supplemental Information
to Consolidated Statement
of Cash Flows:
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended
September 3, 1995 August 28, 1994 August 29, 1993
----------------- --------------- ---------------
<S> <C> <C> <C>
Cash paid for:
Interest $2,803,000 $1,928,000 $2,460,000
Income taxes 1,463,000 4,070,000 4,070,000
</TABLE>
Noncash investing activity:
During the year ended August 28, 1994, the Company purchased all of
the capital stock of Kat-Em International, Inc. for $1,150,482. In conjunction
with the acquisition, liabilities were assumed as follows:
<TABLE>
<S> <C>
Fair value of assets acquired $3,619,061
Cash paid for the capital stock, including
acquisition costs 1,150,482
----------
Liabilities assumed $2,468,579
==========
</TABLE>
(Note Q) - Concentration of Credit Risk:
(1) Cash in banks, based on bank balances, exceeded federally insured
limits by $3,800,000 and $2,700,000 at September 3, 1995 and August 28, 1994,
respectively.
(2) Accounts receivable from manufacturers and retailers aggregated
approximately $19,368,000 and $6,447,000 at September 3, 1995, respectively, and
$23,554,000 and $8,855,000 at August 28, 1994, respectively. The Company
performs ongoing credit evaluations of its customers' financial condition and,
generally, requires no collateral from its customers.
(3) Accounts receivable at September 3, 1995 and August 28, 1994 also
includes $3,320,000 and $4,765,000, respectively, of due from factors.
<PAGE>
<PAGE>
CONCORD FABRICS INC. SCHEDULE II
AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
Column A Column B Column C Column D Column E
-------- -------- -------- -------- --------
Balance at Additions Balance at
beginning charged to end of
Description of year operations Deductions* year
----------- ---------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
Estimated doubtful
accounts:
Year ended
August 29, 1993 $1,755,000 $1,777,000 $1,692,000 $1,840,000
Year ended
August 28, 1994 $1,840,000 $1,321,000 $ 986,000 $2,175,000
Year ended
September 3, 1995 $2,175,000 $ 633,000 $1,583,000 $1,225,000
</TABLE>
*Deductions from estimated doubtful accounts represent accounts written
off, net of recoveries of accounts written off in prior years.
The notes to financial statements are made a part hereof.
<PAGE>
<PAGE>
Item 9. Disagreements on Accounting and Financial Disclosure.
Not applicable.
PART III
Item 10. Directors and Executive Officers of the Registrant.
This information is incorporated by reference from the Registrant's
definitive Proxy Statement for the Annual Meeting of Stockholders to be held on
January 9, 1996, to be filed pursuant to Section 14 of the Exchange Act within
120 days after the end of Registrant's 1995 fiscal year.
Item 11. Executive Compensation.
This information is incorporated by reference from the Registrant's
definitive Proxy Statement for the Annual Meeting of Stockholders to be held on
January 9, 1996, to be filed pursuant to Section 14 of the Exchange Act within
120 days after the end of Registrant's 1995 fiscal year.
Item 12. Security Ownership of Certain Beneficial
Owners of Management.
This information is incorporated by reference from the Registrant's
definitive Proxy Statement for the Annual Meeting of Stockholders to be held on
January 9, 1996, to be filed pursuant to Section 14 of the Exchange Act within
120 days after the end of Registrant's 1995 fiscal year.
Item 13. Certain Relationships and Related Transactions.
This information is incorporated by reference from the Registrant's
definitive Proxy Statement for the Annual Meeting of Stockholders to be held on
January 9, 1996, to be filed pursuant to Section 14 of the Exchange Act within
120 days after the end of Registrant's 1995 fiscal year.
<PAGE>
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports
on Form 8-K.
(a) (1) and (2) The following financial statements and schedules are
filed as part of this Report. See Item 8 -- Index of Financial Statements and
Schedules.
(a) (3) Exhibits.
*3.1 Delaware Certificate of Incorporation of the Registrant
incorporated by reference from Appendix B to Registrant's Proxy Statement dated
January 26, 1988.
*3.2 Delaware bylaws of the Registrant incorporated by reference from
Exhibit 3.2 to Registrant's Annual Report on Form 10-K for the year ended August
28, 1988.
*4.1 Note Agreement between Registrant and John Hancock Mutual Life
Insurance Company dated November 30, 1994 (the "Note Agreement"), incorporated
by reference from exhibit 4.1 to Registrant's Report on Form 8-K dated December
15, 1994.
*10.1 Employment Agreement dated August 27, 1992 between Registrant and
George Gleitman incorporated by reference from exhibit 10.1 to Registrant's
Annual Report on Form 10-K for the year ended August 30, 1992.
*10.2 Employment Agreement dated as of March 2, 1994 between Registrant
and Earl Kramer, incorporated by reference from exhibit 10.2 to Registrant's
annual report on form 10-K for the year ended August 28, 1994.
*10.3 Deferred Compensation Agreement dated June 14, 1977, as amended on
February 5, 1986 between Registrant and Martin Wolfson incorporated by reference
to exhibit 10.5 to Registrant's Annual Report on Form 10-K for the fiscal year
ended August 31, 1986.
*10.4 Lease Agreement dated August 1, 1994 between 1359 Broadway
Associates and Concord Fabrics Inc., incorporated by reference from exhibit
- -------------------
* Document is available at Public Reference Section of the Securities
and Exchange Commission, Commission File No. 1-5960.
<PAGE>
<PAGE>
10.4 to Registrant's Annual Report on form 10-K for the year ended August 29,
1994.
*10.5 Lease Agreement dated October 1, 1994 between 1359 Broadway
Associates and Concord Fabrics Inc., incorporated by reference from exhibit 10.5
to Registrant's Annual Report on form 10-K for the year ended August 28, 1994.
*10.8 Employment Agreement dated December 6, 1993 between Registrant and
Mark Neugeboren incorporated by reference from exhibit 10.8 to Registrant's
Annual Report on form 10-K for the year ended August 28, 1994.
22 Subsidiaries of the Registrant: Concord FSC Inc., Trilogy Fabrics
Inc., and Kat-Em International, Inc.
(b) Report on Form 8-K dated December 15, 1994 in connection with the issuance
and sale $20,000,000 in notes to John Hancock Mutual Life Insurance Company.
(c) See item 14(a)(3), above.
(d) See item 14(a)(2), above.
- -------------------
* Document is available at Public Reference Section of the Securities
and Exchange Commission, Commission File No. 1-5960.
<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
Dated: November 20, 1995 CONCORD FABRICS INC.
/s/ Earl Kramer
----------------------
Earl Kramer
President and Director
Pursuant to the requirements of the Securities Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated.
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------- ----- ----
<S> <C>
/s/ Earl Kramer <C>
- ------------------- Director, President November 20, 1995
Earl Kramer (Principal Executive
Officer)
/s/ Martin Wolfson
- ------------------- Director, November 20, 1995
Martin Wolfson Senior Vice President,
Treasurer (Principal
Financial Officer)
/s/ Arthur Langer
- ------------------- Controller (Principal November 20, 1995
Arthur Langer Accounting Officer)
/s/ Alvin Weinstein
- ------------------- Director, Chairman of November 20, 1995
Alvin Weinstein the Board
/s/ Frank Weinstein
- ------------------- Director, Vice Chairman November 20, 1995
Frank Weinstein of the Board
/s/ George Gleitman
- ------------------- Director, President Emeritus November 20, 1995
George Gleitman of Home Sewing Division
/s/ Fred Heller
- ------------------- Director November 20, 1995
Fred Heller
/s/ Richard Solar
- ------------------- Director November 20, 1995
Richard Solar
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FORM
10-K AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO IT.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1
<CURRENCY> U. S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-03-1995
<PERIOD-START> AUG-29-1994
<PERIOD-END> SEP-03-1995
<EXCHANGE-RATE> 1
<CASH> 2,362,119
<SECURITIES> 0
<RECEIVABLES> 27,909,706
<ALLOWANCES> 0
<INVENTORY> 24,071,426
<CURRENT-ASSETS> 60,918,654
<PP&E> 8,153,913
<DEPRECIATION> 0
<TOTAL-ASSETS> 76,645,925
<CURRENT-LIABILITIES> 16,293,514
<BONDS> 0
<COMMON> 1,807,531
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 76,645,925
<SALES> 180,152,779
<TOTAL-REVENUES> 180,152,779
<CGS> 143,950,238
<TOTAL-COSTS> 184,253,014
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,432,438
<INCOME-PRETAX> (4,100,235)
<INCOME-TAX> (1,414,000)
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> (297,266)
<CHANGES> 0
<NET-INCOME> (2,983,501)
<EPS-PRIMARY> (.83)
<EPS-DILUTED> 0
</TABLE>
